Early in the European session, the British pound is trading at around 1.1517 just above the 21 SMA located at 1.1511 and above -1/8 of Murray located at 1.1474.
Seeing as GBP/USD trades above these key levels, it could offer some support and give it a chance to continue moving higher. So, the currency pair could build upside momentum and reach the area of 1.1823 (200 EMA).
The worsening outlook for the UK economy suggests that a recovery could be temporary for GBP/USD and it could resume its bearish sequence.
On the 4-hour chart, we can see the formation of a technical reversal pattern called shoulders and head which could be a positive sign and the price could reach the 0/8 Murray level at 1.1718 and 1.1823 (200 EMA).
The 4-hour chart shows that the British pound has broken out of the downtrend channel formed on August 23. The currency pair is now trading above this level and could leave the path clear to reach the key resistance at 1.1823.
On the other hand, the eagle indicator is showing an oversold signal and a technical bounce is likely to occur in the next few hours, to give the British pound a bullish opportunity.
Our trading plan for the next few hours is to buy the British pound above 1.1511 with targets at 1.1718 (0/8 Murray) and 1.1823 (200 EMA).
On the contrary, with a daily close below -1/8 Murray (1.1474), we should avoid selling as the trading instrument could resume the bearish movement.
