GBP/USD has found a strong barrier near the 1.2400 level which benefits the bears. This correction is a consequence of profit-taking by the bulls and a recovery of the US dollar. The latest H-4 candlesticks show that the pair could initiate a strong technical correction in the coming days.
The British pound is trading above the 21 SMA located at 1.2321 and below the 7/8 Murray. The pair is showing signs of a technical reversal. If it breaks below 1.2320, we could expect a strong technical correction and the instrument could even reach the 200 EMA area located at 1.2117.
On the chart above, we can see that the British pound is trading within an uptrend channel formed since January 9th. We can observe the formation of a diamond pattern. If the pound trades below 1.24, this pattern could confirm a bearish movement and push GBP/USD down to the area of 1.2207 (6/8 Murray) and 1.2117 (200 EMA).
For the pound to resume its bullish cycle, we should expect it to consolidate above 1.2405 and then it could reach 1.2451 (7/8 Murray), and even the psychological level of 1.25.
As long as GBP/USD trades below 1.24 and consolidates below 1.2321, there is strong downward pressure which we could expect to happen in the coming days. So, GBP/USD could reach 1.2117 and even the psychological level of 1.20.
On January 18, the eagle indicator reached the extremely overbought zone. As the pound sterling is showing signs of exhaustion, a technical rebound is highly probable in the coming days. This move will be considered a signal to sell.