Early in the American session, the British pound is trading at around 1.1541. It is trading above the 21 SMA and below the top of the downtrend channel formed on August 4.
In the American session yesterday, GBP/USD reached a low of 1.1404 and then made a strong technical bounce consolidating above -1/8 Murray. Now the British pound is trading in a key area which could give a positive signal in the coming hours.
On the 4-hour chart, we can see the formation of a downtrend channel since the beginning of August. The pound has been testing this channel and has been holding a downtrend but is showing oversold signs and exhausting bearish force.
If the bullish force prevails, the currency pair could make a sharp break around 1.1586 (top of the bearish channel) which could mean a change in the trend and will be the beginning of a bullish sequence. So, the price could reach the EMA 200 located at 1.1838.
On the contrary, a return below the psychological level of 1.1500 and a daily close below 1.1512 (21 SMA) will mean the resumption of the bearish sequence and this could push the price down to the 7th September low at 1.1404 and even to -2/8 Murray at 1.1230.
The market sentiment report shows that there are 76.74% of traders who are buying the GBP/USD pair. This is a positive sign for the pound. However, any technical bounce could be seen as an opportunity to sell.
The eagle indicator is giving a positive signal. We should wait until a break of the downtrend channel around 1.1582 is confirmed. Once it is confirmed, we will be able to buy with targets at 0/8 Murray located at 1.1660 and 200 EMA located at 1.1838.
Our trading plan for the next few hours is to wait for a consolidation above the 21 SMA to buy, targeting 1.1582. Additionally, a sharp break above 1.1582 and a consolidation above this level on the 4-hour chart could favor a further bullish signal to buy with targets at 1.1786 and 1.1838.
