In the European session, the British pound reached the level of June 30 at 1.2190. The bullish momentum stopped when it touched the top of the uptrend channel and the zone 4/8 Murray. It is currently making a strong technical correction but could find support at around the 200 EMA located at 1.2102.
The British pound is trading at 1.2131 after bouncing off the 200 EMA located at 1.2102. The bullish bias continues to prevail but the sterling is showing signs of exhaustion, so a technical correction is likely in the coming days.
The bullish trend that has been unfolding since July 13th is still going on and the pound is likely to continue its ascent in the coming days for which we should expect it to consolidate above 1.2100.
In the coming weeks, the downward trend is likely to be limited, at least for now, due to growing bets on a hike of 50 basis points by the Bank of England at its next monetary policy meeting in August.
Yesterday, the US dollar suffered heavy losses against its main rivals during Fed Chairman Jerome Powell's press conference. Powell announced that they would not offer any guidance on upcoming rate decisions. This will assure investors to take refuge in risky assets and stop investing in the US dollar.
In the short term, the British pound is likely to extend its strength and could reach the zone of 6/8 Murray at 1.2451, but it needs to make a technical correction as indicators are showing overbought signals.
The eagle indicator has reached the 95-point zone which signals an imminent technical correction. The bottom line is to wait to buy at around 1.2202 or in case the price hits the lower border of the uptrend channel at around 1.2055.
Our trading plan for the next few hours is to buy the British Pound if it consolidates above 1.2102. Alternatively, in case of a pullback to 4/8 Murray around 1.2202, there will be a signal to sell.