Early in the European session, the British pound is trading around 1.1829. GBP is rebounding after falling to the low of 1.1791 on August 19.
On the H4 chart you can see that the British pound is trading below 1/8 Murray and below the 21 SMA (1.1973) and the 200 EMA (1.2092). The bias remains bearish but a technical rebound could occur in the next few hours.
The drop in the British pound seen last week was due in part to the Fed's comments. The Central Bank is planning to raise the rate by 0.50% or 0.75% at its next meeting in September.
According to the 4-hour chart, we can see that the pound is oversold because the eagle indicator is moving above 10 points.
The US dollar rises on all fronts. In fact, the US dollar index (USDX) reached its highest level since July 15 and continues to be supported by expectations of the Fed's tightening. It is currently trading at 108.06 but a correction could occur as the bullish strength is exhausted and showing signs of overbought conditions, which could favor the British pound.
In the event that the British pound trades above 1/8 Murray at 1.1840, we would expect the technical bounce to continue and the price could reach the top of the downtrend channel formed since July 29 around 1.1887.
Additionally, if the GBP/USD pair trades above the key level of 1.1890, we could expect it to hit the strong resistance of 2/8 Murray located at 1.1962 and the 21 SMA located at 1.1973. Finally, it could reach the top of the downtrend channel formed since August 10 around the psychological level of 1.2000.
Conversely, if the British pound fails to trade above 1.1840 (1/8 Murray), there is a chance that bearish pressure will continue and it could push the price to 1.1790 and even 0/8 Murray located at 1.1718.
Our trading plan for the next few hours is to buy above 1.1804, with targets at 1.1840 (1/8), 1.1887, and 1.1962 (2/8). The eagle indicator supports our bullish strategy as it is showing signs of a technical bounce.
