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Early in the American session, the British pound is trading around 1.2198 above the 21 SMA and below the 6/8 Murray. We may see some exhaustion of the bullish force but the instrument could resume the bullish cycle if it trades above the key area of 1.2200.
After having reached the high of 1.2288 in the European session, GBP/USD is showing signs of exhaustion and it is likely that it could fall below 1.2180, then a new bearish cycle could begin.
The inflation data, released last week, showed that the CPI fell in December for the first time in more than two and a half years. In addition, several Fed officials support the idea of a 0.25% increase in February. Given this fact, the British pound is likely to continue its rise and in the short term could reach the psychological level of 1.25.
On a technical level, GBP/USD is trading in a turning-point zone. It is likely that any drop below 1.2190 could push the price down towards support levels of 1.21 and 1.2064 (200 EMA).
The area of 1.2100, if broken decisively, will expose the next relevant support near the psychological level of 1.2000. The latter coincides with the 200 EMA on the daily charts and should act as a key point for the GBP/USD pair.
A convincing breakout would nullify any positive outlook for the pair and turn the trend in favor of the bears until reaching the target at 1.1474 (3/8 Murray).
On the other hand, the 1.23 level has become a barrier for the GBP/USD pair. In case it consolidates above 1.2280, the pair could reach 1.2375 and even 7/8 Murray at 1.2451. The bullish momentum could extend further and reach the psychological level of 1.25.
The eagle indicator is approaching extremely overbought levels which the bearish correction is likely to extend only if GBPUSD breaks below 1.2180.
Our trading plan for the next few hours is to sell below 1.2190 with a target at 1.2064. The eagle indicator is giving a negative signal which supports our bearish strategy.