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Early in the American session, the British pound (GBP/USD) is trading above the 21 SMA and above the +1/8 Murray with bullish strength. In addition, we can see that the British pound is breaking the symmetrical triangle pattern which has been developed since November 30.
The fall in yields on US Treasury bonds due to the increase in risk aversion and concerns about an economic recession coming from China, caused the dollar to weaken, which benefitted the GBP/USD pair. It is likely to continue its rise in the next few hours and it could reach the resistance of 1.2345 and up to the psychological level of 1.25.
In case the British pound consolidates above 1.2207 (+1/8 Murray), it is expected to continue rising and it could reach the level of 1.2343 and even the levels of +2/8 Murray around 1.2695.
On the downside, if GBP/USD trades below 1.2190 (21 SMA), it could favor a fall in the GBP/USD pair and it could reach the bottom of the symmetrical triangle pattern around 1.2095.
A sharp break below this support could accelerate the decline to the psychological level of 1.20 and even to the 200 EMA around 1.1849. Should GBP/USD manage to recover to 1.2200 and stabilize above that level, it could lead to a bounce towards 1.2345 and up to 1.25.
Since December 6, the Eagle indicator is giving a positive signal, which is likely to support the strength of the GBP/USD pair and the price may extend its rise in the coming hours and until the publication of inflation data, which will be released tomorrow during the American session.
According to the 4-hour chart, our trading plan is to buy above 1.2207 with targets at 1.2343 and 1.2695 (+2/8 Murray). In case the British pound falls below 1.2190, it will be a clear signal to sell with targets at 1.2095 and 1.1849 (200 EMA).
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