Early in the American session, GBP/USD is trading around 1.2735. We can see that the British pound reached the top of the downtrend channel around 1.2780. Since then, it is showing signs of exhaustion of the bullish force. hence, a technical correction up to the 1.2680 area (strong support) is likely to follow.
According to the 4-hour chart, the British pound has retraced towards the 61.8% Fibonacci zone. This level, traced from the June 14 high at 1.2846 to the June 29 low at 1.2590, represents a technical reversal area. If the British pound trades below 1.2754 (61.8%), we could expect a technical correction in the next few hours.
The chart above shows that the British pound has found strong support around 1.2680. This level in the past served as a key point that prevented the pound from falling and gave it bullish momentum. If a technical correction occurs, we could expect a technical bounce around this area and GBP/USD could reach 1.2760 (top of the bearish channel).
In case the bearish pressure prevails, we could expect the British pound to fall below 1.2680 and below the 21 SMA located at 1.2704. Eventually, GBP/USD could reach the 200 EMA located at 1.2618.
Our trading plan for the next few hours is to sell the British pound below 1.2754 (61.8%) with the target at 1.2680. In case the pound bounces at 1.2680, it will be seen as a signal to buy with the target at 1.2760.
The Eagle indicator is giving a positive signal. It signals a technical correction in the next few hours and then, GBP/USD will resume its bullish cycle.
