Early in the European session, the British pound (GBP/USD) is trading around 1.1080 above the 21 SMA below the 200 EMA. A breakout of the downtrend channel is expected and the pair could reach the area of 1.1325 in the next few days.
According to the 4-hour chart, we can see that the British pound is following an upward bias. In case GBP/USD continues to trade above the level of 1.1057 (21 SMA), it will be a clear signal to continue buying with targets at 7/8 Murray located at 1.1230 (7/8) and 1.1325.
On the other hand, in case GBP/USD returns below 1.1045, it could mean a new bearish sequence and the price could push lower towards the bottom of the channel around 1.0825.
Since October 5th, the eagle indicator has been showing a negative signal and has been moving inside a downtrend channel. If in the next few hours, the pound remains within the downtrend channel formed on October 3, the downtrend could resume and the price could fall towards 6/8 Murray at 1.0742.
The British pound has been recovering for two days straight. In case it consolidates above 1.1120, we could expect it to reach a strong resistance of 1.1325 (200 EMA).
The market will be waiting for the fresh US inflation figures. This data will be on tap at the opening of the American session. If the data shows easing inflationary pressure, it could favor the GBP/USD pair and it could climb to 1.1325.
The key level could be the 21 SMA located at 1.1057 which acts as a pivot point. Above this level will be a signal to buy and below this level, there is a chance to sell.