The pound sterling strengthened due to the unexpected rise in interest rates from the Bank of England. The BoE raised the interest rate from 0.10% to the current 0.25%, a figure not anticipated by the market.
Consequently, the British pound has spiked sharply above 1.3305, approaching resistance at the 200 EMA located at 1.3377.
On the 4-hour chart, we can see that since December 1, the eagle indicator has been moving above an uptrend channel. When the pound broke the 21 SMA and the bearish channel, it gained momentum and a market volume increased.
The moving average of the eagle indicator shows that it is approaching the overbought zone. It has a little distance to reach 95-points and then it will be an imminent signal to sell the British pound.
Therefore, we must hope that the bullish momentum will lead the pair to test the area of the EMA of 200 or the zone of 6/8 Murray. A rejection of these levels will be a good point to sell.
Yesterday with the announcement of its monetary policy by the Fed, the British pound came to test the support of 4/8 of Murray, printing the low of 1.3171. From that level, in less than 24 hours, the pound gained more than 170 pips, reaching the price level of the beginning of December.
The outlook remains bullish for the next few hours. We expect GBP/USD to consolidate below the 6/8 Murray or below the 200 EMA. If it fails to break through this zone, it will signal a technical correction targeting the 21 SMA located at 1.3242.
Our trading plan is to buy above 5/8 (1.3305) or wait until GBP/USD tests resistance of the 200 EMA. Then, we will be able to sell around 1.3377. Our target will be located at 1.3305 and at 1.3242 (21 SMA). The eagle indicator is under an overbought signal and bullish momentum exhaustion.
Support and Resistance Levels for December 16 - 17, 2021
Resistance (3) 1.3412
Resistance (2) 1.3375
Resistance (1) 1.3347
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Support (1) 1.3314
Support (2) 1.3242
Support (3) 1.3191
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A trading tip for GBP/USD on December 16 - 17, 2021
Sell below 1.3377 (200 EMA) with take profit at 1.3305 and 1.3242 (21 SMA), stop loss above 1.3405.