Early in the American session, the British pound is trading around 1.2325, bouncing after having reached a low of 1.2295. During the European session, the GBP/USD pair was showing signs of strength reaching 1.2412, but before the opening of the American session, we have seen a strong technical correction.
The last candlestick on the 4-hour chart is seen as engulfing, which means that we could expect a technical correction in the coming days. Hence, the instrument could reach the 6/8 Murray at 1.2207 and even reach the 200 EMA at 1.2147.
In the 4-hour chart, we can see a head-and-shoulders pattern, which means that if the pound consolidates and breaks below the neckline located at 1.2325, we could expect a decline in the coming days and the pair may even reach the area of 1.2150.
On the other hand, in case there is a pullback towards the 21 SMA located at 1.2375 and if the pair consolidates below the intraday high (1.2412), we could expect a technical rebound seen as an opportunity to sell with targets at 1.2290 and 1.2207.
On the upside, buyers could show interest if GBP/USD manages to come back and consolidate above the 21 SMA (1.2375). With this scenario, the next resistances are located at 1.2420 (weekly resistance) and 1.2451 (7/8 Murray).
A daily close below the neckline of the head-and-shoulders pattern located at 1.2325 could mean a decline in the British pound as it could reach levels of 1.2150 and could even reach 5/8 Murray at 1.1962.
Our trading plan for the next few hours is to sell in case of a pullback at 1.2375 or at the current price levels of 1.2325 with targets of 1.2250 and 1.2207 (6/8 Murray).
