Early in the American session, the British pound is trading at around 1.1375. Under strong downward pressure, the pair is likely to carry on with its bearish move in the coming hours if it trades below 1.1400. the price is expected to consolidate at around the bottom of the downtrend channel at 1.1295.
On the contrary, a sharp break of the downtrend channel which has been underway since September 13 at around 1.1395 could confirm the recovery of the British pound. GBP/USD could quickly reach the 21 SMA zone located at 1.1467 and could even reach the strong resistance of -1/8 Murray located at 1.1474.
GBP/USD is currently hovering at around the 1.1375 level, just a few pips above its lowest level since 1985 hit on Friday at 1.1349.
The gloomy outlook for the UK economy continues to undermine the British pound and is one of the main factors putting downward pressure on the GBP/USD pair.
The UK Office for National Statistics reported on September 16 that monthly retail sales reflected the biggest drop since December 2021 and fell much more than expected in August. This is viewed as another sign that the economy is slipping into recession.
However, the technical indicators are showing extremely oversold levels. So, a technical bounce towards the psychological level of 1.1500 and even to the 200 EMA at 1.1731 will follow in the coming days.
The Fed will announce its policy decision on Wednesday and it will be followed by the Bank of England meeting on Thursday. Strong volatility is expected around the GBP/USD pair.
Encouraging data for the dollar (USDX) could push the pair towards the support of -2/8 Murray located at 1.1230. It could be the key level in case the downward pressure persists and this zone could offer a strong technical rebound.
On the contrary, in case the British pound consolidates above the psychological level of 1.1500, it is likely to set the stage for the recovery and GBP/USD could reach the top of the downtrend channel formed on August 25. The trading instrument could reach the 200 EMA located at 1.1731.
Our trading plan for the next few hours is to buy the British pound should it break above 1.1395 with targets at 1.1467 and at the strong resistance at 1.1474 (-1/8 Murray). The eagle indicator is giving a positive signal which supports our bullish strategy.
