Early in the European session, the British Pound (GBP/USD) is trading at around 1.0795. A reversal is going on after the price reached the high of 1.0914 in the American section.
On the 4-hour chart, we can see the break of the pennant pattern that was formed after the drop on September 26.
The US dollar fell very sharply in the American session yesterday from all-time highs of 114.71 and dropped to a low of 112.50. This technical correction encourages the recovery of the GBP/USD pair. For the outlook to remain positive, the pound must consolidate above 1.0740.
If a technical bounce around 6/8 Murray (1.0742) occurs in the next few hours, GBP/USD could resume the bullish bias and could reach the top of the downtrend channel around 1.1025.
The rally seen yesterday from the low of 1.0538 to the high of 1.0914 could be a sign that the bearish trend has ended and the pound could start recovery in a few days.
Our trading plan for the next few hours is to wait for a technical bounce around the 21 SMA located at 1.0742. This area has become a strong support for the British pound which could suggest a buying opportunity, with targets at 1.0930 and at the psychological level of 1.1000. The price could even reach the resistance of 1.1050 (top of the bearish channel).
On the contrary, in case the British pound makes a close below 1.0740 on the daily chart, it could mean the resumption of the bearish movement and GBP/USD could reach the level of 1.0538 printed yesterday in the European session and could fall to the low of the month at 1.0324.
