Early in the European session, the British pound is trading around the 21 SMA located at 1.1464. We can see a recovery in the British pound. If it continues to trade above 1.1550, it is likely to reach 4/8 Murray located at 1.1718.
Last week, the British pound managed to test the psychological level of 1.1500. After showing how strong this support is, the pound started a technical bounce and is now showing signs of a bullish continuation.
On the other hand, market expectations that the Federal Reserve could begin to ease its pace of monetary tightening in the coming months assure investors to turn to risky assets, leaving the dollar aside.
In case investors find some proof of such prospects, assets trading against the dollar could resume or recover from downward pressure and we could detect a bullish cycle in the coming days and weeks.
This week, the Federal Reserve will increase its interest rate by 0.75% on November 2nd. In the meantime, the markets are looking forward to the Fed's policy decision and we could see some calm in the market until the exact rate hike is known. Then, we could expect a change in GBP/USD's trend or a resumption of the bullish cycle.
On the other hand, the Bank of England is expected to increase its interest rate by 0.50% on November 3rd. In case both regulators raise interest rates as expected, a technical correction could occur and GBP/USD could fall towards the 1.1435 level where the 200 EMA is located.
As long as the British Pound trades above 1.1564 (21 SMA), we can expect it to continue rising towards 1.1718 and could even hit 5/8 Murray at 1.1962
As long as the British pound trades above 1.1564, we can expect it to continue to rise towards 1.1718 (4/8 Murray) and could even reach 5/8 Murray at 1.1962. Finally, a psychological level of 1.2000 is in the cards.
Our trading plan for the next few hours is to buy the British pound above 1.1564 with targets at 1.1718. On the other hand, a close below 1.1550 (21 SMA) on the 4-hour chart will be a signal to sell, with targets at 1.1474 and 1.1357 (200 EMA).