Early in the European session, the British pound is trading around 1.1972, above the 200 EMA , and below the 21 SMA located at 1.1983.
According to the 1-hour chart, we can see that the British pound is trading within a downtrend channel which has been developing since November 22. The British pound is likely to trade within this bearish channel due to the release of US unemployment data (NFP) over the weekend. The pair is likely to consolidate between 1.1870 and the psychological level of 1.2000.
The November FOMC minutes released last week calmed down market anxiety and investors are expecting a 0.50% rate hike in December. Such prospects are fueling risk appetite which is likely to encourage the British pound to continue its rise in the days ahead.
In case risk appetite continues to dominate financial markets, the pair could extend its rise. The technical outlook also points to a recovery in bullish momentum and the price could reach the zone of +2/8 Murray at 1.2207.
In case the GBP/USD pair trades above 1.1985 (21 SMA), we could expect it to reach the resistance zone that coincides with the top of the bearish channel at 1.2045. Additionally, in the event of a daily close above this level, we could expect a rally towards +2/8 Murray located at 1.2207.
Conversely, in case the British pound technically bounces around the downtrend channel support, it could be a clear opportunity to buy with targets at 1.1970 and 1.2040.
Our trading plan for the next few hours is to buy above 1.1883 with targets at 1.2045 and wait for a sharp break above 1.2050 to continue buying with targets at 1.2117 and 1.2207. In case there is a technical rebound around 1.1870, it will also be a signal to buy. The eagle indicator reached the extremely oversold zone on November 28. A technical bounce is likely to happen in the next few hours.