Early in the European session, the British pound (GBP/USD) is trading at 1.2109. It is rebounding after reaching a low of 1.2054 yesterday in the American session. It is currently trading below the 21 SMA and within a falling wedge pattern whose break could lead to a bullish movement in the British pound in the next few days.
In case there is a technical bounce around this technical figure between 1.2045 or in case it falls towards the 200 EMA located at 1.2021, it could be considered an opportunity to buy with targets at 1.2145 and 6/8 Murray (1.2207).
The US dollar index (UDX) recovers after heavy losses of the previous day which in turn is considered a key factor putting downward pressure on GBP/USD. However, the dollar is likely to remain under downward pressure until the end of the year, which benefits the recovery of the British pound.
We expect a strong technical bounce to occur around the 200 EMA (1.2021) or around the psychological level of 1.20. Only a significant break below these supports could cause strong bearish pressure and the British pound could fall to the area of 1.15 in the medium term.
Conversely, a sharp break above 1.2145 could be a clear signal to buy the British pound with targets at 1.2207 (6/8 Murray) and 1.2323.
On the contrary, in case the British pound fails to break the strong resistance of 1.2145, we could expect a decline and a continuation of the bearish movement and GBP/USD could fall towards the 200 EMA around 1.2021.
According to the 4-hour chart, we can see that the eagle indicator has reached the extremely oversold area. It is likely to continue the technical rebound in the next few hours and could reach levels of 1.23 in the next few days.