In the European pre-market, the GBP / USD pair is trading below a downtrend channel, from the high of 1.4222. There is likely to be downward pressure within this channel.
The British pound benefited from rising expectations of a rise in interest rates in the United Kingdom that could increase borrowing costs in early 2022. Therefore, the pound remains bullish, but showing signs of exhaustion.
On the other hand, the dollar index has come under pressure due to the Fed's stance, which has indicated that the central bank is prepared to continue buying bonds at the current rate of 120 billion dollars a month, rejecting rumors of reducing it.
Last Friday, the GBP / USD pair made a technical rebound from the low of 1.4130 to the resistance zone of 1.42. Now we expect a consolidation in this zone because Monday is a holiday in the United States and also in the UK in compliance from the spring bank holiday. So, GBP/USD is going to trade in a thin market.
The resistance line of the bearish channel is located at the level of 1.4205. We expect the pair to rebound from the SMA of 21 located at 1.4160 and 1.4205. This range could be the possible movement below 1.4205, so we recommend selling. If the price makes a bounce off 1.4160, you could buy as there is the strong 8/8 Murray support and 200 EMA.
Our recommendation is to sell below the level of 1.4205 and below 1.4222, because there is +1/8 of a murray area of strong resistance. In addition, the eagle indicator is showing signs of oversold market conditions, thus indicating an imminent correction in the next hours.
Support and Resistance Levels for May 31, 2021
Resistance (3) 1.4290
Resistance (2) 1.4240
Resistance (1) 1.4217
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Support (1) 1.4165
Support (2) 1.4145
Support (3) 1.4111
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Trading tip for GBP/USD for May 31, 2021
Sell bellow 1.4205 (trend line), with take profit at 1.4160 (EMA 200), stop loss above 1.4240.
Sell if breaks 1.4160 (8/8 of murray and EMA 200), with take profit at 1.4130, stop loss above 1.4195.