Early in the American session, the British pound is trading around 1.2075, inside a downtrend channel formed since December 13 and above the 200 EMA and below the 21 SMA. We can observe a technical rebound but it lacks bullish force.
Yesterday in the American session, the British pound reached a low around the psychological level of 1.20 but managed to recover and is now consolidating above the 200 EMA.
It is likely that in the next few days GBP/USD could continue its rise on the condition it breaks sharply the top of the downtrend channel and consolidates above 1.2102.
In case the British pound fails to break the 21 SMA and the downtrend channel, we could expect a bearish movement to resume and GBP/USD could return to 1.2017 (200 EMA) and could even reach the support zone of 5/8 Murray around 1.1962.
The trading volume of the foreign exchange market is expected to decrease in the next few days. Hence, traders should be braced for unexpected movements for which we must be very careful because this always happens due to low liquidity.
Our trading plan for the next few hours is to wait for the British pound to reach the resistance zone of 1.2102 to sell with targets at 1.2017. Conversely, if the British pound consolidates above 1.2110 (21 SMA), it will be a clear signal to buy with targets at 1.22. The instrument could reach the key level of 1.2315.
Since December 22, the Eagle indicator has reached extremely oversold levels. So, any decline in the British pound is likely to be seen as a buying opportunity.
