Early in the American session, the British pound is trading below the 21 SMA and below the 7/8 Murray. We can see some bearish pressure and GBP/USD is likely to continue falling over the next few hours until the price reaches the bottom of the downtrend channel around 1.2215.
Market caution could help the US dollar to strengthen which could force GBP/USD to fall to support levels of the 200 EMA around 1.2207.
According to the 4-hour chart, we can see that the British pound is trading within a downtrend channel formed since January 13. In case there is a pullback towards 1.2374 (21 SMA) or towards the top of the downtrend channel around 1.2392, it will be seen as a signal to sell.
The British pound has been consolidating since last week as the market is waiting for the policy updates from the United States and the United Kingdom to be unveiled in the next few days, which could create strong volatility in the pair and we could expect a return towards the area of 1.24 or a fall towards the zone of 1.22.
For a return of the bullish cycle, the British pound should consolidate above 1.2415 and then it could reach 7/8 Murray at 1.2451 and could even go towards the psychological level of 1.2500.
For a bearish reversal, the British pound should trade below 1.2207 and then we could expect it to drop towards the psychological level of 1.2000. It could even hit the support of 5/8 Murray at 1.1962.
Our trading plan is to sell GBP/USD in case there is a pullback towards 1.2474 (21 SMA) or below 1.2320 with targets at 1.2250 and 1.2207.