Early in the American session, the British pound is trading around 1.2376 above the 21 SMA and showing some technical correction after reaching a high of 1.2443 on Tuesday.
According to the 4-hour chart, we can see that the pound is bouncing after hitting the low at 1.2342. GBP/USD is likely to continue its rise until the area of 1.2410 - 1.2443 is reached.
The pound is expected to continue making a technical correction in the next few hours and may reach the bottom of the uptrend channel which has been underway since November 3 (1.2299).
A sharp break below the uptrend channel and a daily close below the 21 SMA around 1.23 will be a clear signal to sell with targets at 1.2207(+1/8 Murray) and 1.2160.
In the next few hours, in the afternoon of the American session, the Fed is expected to increase its interest rate by 0.50% up to 4.5%. This decision is already valued in the market price and should not agitate the GBP/USD pair, only if there is an increase of 0.75%.
Therefore, market participants will focus on the Summary of Economic Projections and the FOMC press conference, looking for clues as to whether the US central bank will turn its policy around sometime in 2023. A hawkish rhetoric of the central bank could favor the dollar and could put pressure on the British pound.
Our trading plan for the next few hours is to wait for a pullback towards the 1.2410 - 1.2443 zone to sell with targets at 1.2299 (21 SMA) and 1.2207. In case there is a sharp break of the uptrend channel, it will be a clear signal to sell, with targets at the 200 EMA located at 1.1943.