Early in the European session, the British pound (GBP/USD) is trading around 1.1584, above the 21 SMA, and above the 200 EMA. The bias remains bullish but GBP is showing exhaustion levels and there could be a technical correction in the next few hours if it falls below 1.1560.
GBP/USD is trading sideways between the 1.1645 and 1.1550 levels. This happens while the market awaits the Fed's policy decision that will be unveiled next week regarding the key interest rate.
The dollar continued to weaken against all its rival currencies, pressured by falling US Treasury yields. This was the main factor that gave GBP/USD a strong bullish momentum.
Given that the market is pricing in a 0.75% interest rate hike by the Fed, it is likely to see a technical correction in the British pound next week and it could resume its bullish cycle again.
The psychological level of 1.1500 has become the initial support. A close below this level on the 4-hour chart could be considered a bearish development and will open the door for another decline towards 1.1343 (200 EMA) and 1.1230 (7/8 Murray).
On the contrary, 1.1645 (top of the bullish channel) acts as an initial resistance. If it is broken and GBP/USD makes a daily close above this level, it could reach 8/8 Murray at 1.1718.
Our trading plan for the next few hours is to sell below the daily pivot point around 1.1565 with targets at 1.1499 (200 EMA). On the other hand, in case there is a pullback towards 1.1610 - 1.1635, it will be considered an opportunity to sell, only if it trades below the top of the uptrend channel.
In case the British pound breaks below the 1.15 psychological level, it will be a clear signal to sell with targets at 1.1343 (200 EMA) and 1.1230 (7/8 Murray). The trading instrument could even drop towards the bottom of the uptrend channel around 1.1120.
