Early in the American session, the British pound is trading at around 1.1274. We can see a strong technical rebound triggered in the European session. Meanwhile, the pair would be able to reach resistance levels that coincide with the top of the downtrend channel and the moving averages of 21 and 200.
The break of 1.14 could restart the bullish path for GBP/USD, taking the price to the target of 1.1718 (8/8 Murray), which would be the first major resistance.
On the other hand, the zone of selling opportunities is located below the bearish trend channel which has been developed since September 29, below 1.1360-1.1400, which also coincides with the 200 EMA. A new descending movement could be established to visit the low of 1.0742 (6/8 Murray).
The modest intraday bounce could be seen as an opportunity to sell below the 21 SMA and below the 200 EMA (1.1315). In case the British pound fails to break this moving average, it could mean a resumption of the bearish cycle.
In the medium term, expectations that the Federal Reserve will maintain its aggressive cycle of rate hikes to control inflation continue to support high yields of US Treasuries and the US dollar, which puts downward pressure on GBP /USD.
Therefore, sustained weakness below the 1.1285-1.1315 area should pave the way for a sharp drop towards the next relevant support near 1.1150. The bearish trajectory could extend further and push GBP/USD lower towards the psychological level of 1.10. The price could even drop to 6/8 Murray at 1.0742
Our trading plan for the next few hours is to sell below 1.1283. Besides, in case of a pullback to 1.1360, it will be a signal to sell with targets at 1.10 and 1.0742.
