Early in the European session, the British pound (GBP/USD) is trading around 1.2758 below the 21 SMA and below the +1/8 Murray (1.2817).
GBP/USD made a technical correction after hitting a high of 1.2848. This pullback could give it a strong bullish momentum if it continues to move within the uptrend channel formed since May 29.
The British pound is likely to resume its bullish cycle only if it consolidates above the 8/8 Murray (1.2695) level which coincides with strong support and the bottom of the uptrend channel.
One factor that could support the strength of the British pound is that the Bank of England could continue its tightening cycle. This could support the British pound and could limit its losses. Investors will be waiting for the BoE's policy announcement on Thursday. So, we could expect consolidation below 1.2817 (+1/8 Murray) and above 1.2700 (8/8 Murray).
Another fundamental factor that could give strong volatility to the pound is the inflation data that will be published in the next few hours. In case the data is below those expected by investors, the pound could make a strong downward movement. On the contrary, we could expect the pound to reach the high of 1.2848 and could even reach 1.29.
According to the technical chart, we can see that the British pound maintains an upward trend channel. In case the pound breaks this channel below 1.2695, we could expect a change in the trend and GBP/USD could reach 7/8 Murray at 1.2573 and could even reach the 200 EMA located at 1.2538.
Our trading plan for the next few hours is to sell the British pound below 1.2788 (21 SMA). Besides, if it reaches +1/8 Murray at 1.2718, it could be seen as a signal to sell with the target at 1.2695. The eagle indicator is giving a bearish signal since June 16. Therefore, any rebound could be seen as an opportunity to sell.
