Early in the American session, the British pound (GBP/USD) is trading around 1.1901 showing some exhaustion and moving away from the high of 1.1941 reached in the European session. The maximum reached at 1.2028 could give it a strong technical correction. However, the key will be to wait until the price settles below the 21 SMA (1.1813).
In the European session, the British pound peaked at 1.1941 supported by higher-than-expected inflation figures. In fact, the UK CPI accelerated to the highest level since 1981 and showed a rate of 11.1% year-on-year.
In case there is a daily close below the 21 SMA located at 1.1813, we could expect a fall towards the bottom of the uptrend channel formed since the beginning of November and the price could even reach the 200 EMA located at 1.1471.
Investors are awaiting hearings on the BoE Monetary Policy Report. In case this data is positive, we can expect the British pound to reach the psychological level of 1.200 again. On the contrary, if the outlook is not favorable for the pound, investors could stop buying and we could see a technical correction. So, GBP/USD could sink below 1.1810 and reach the psychological level of 1.1500.
Our trading plan for the next few hours is to wait for a technical correction below 1.1930 to sell, with targets at 1.1813. In case there is a daily close below 21 SMA, it will be a signal to continue selling with targets at 1.1718 (8/8 Murray), 1.1630, and 1.1475 (7/8 Murray).
The eagle indicator has reached the key 95-point zone which represents the extremely overbought status of the currency pair. Therefore, we could sell in case the pound trades below the psychological level of 1.20 with short-term targets at 1.1471.
