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GBP/USD is bouncing and extending its recovery from the two-year low reached on July 12 at 1.1806. Now the pound could face a strong resistance zone. If it fails to overcome it, the pound is likely to resume the downtrend.
Early in the American session, the British pound is trading at around the 21 SMA at 1.1927. The pound has strong resistance above this area as the downtrend channel formed from June 27 and 1/8 Murray converge.
GBP/USD made a good rebound after reaching the 1.1806 area. The pair is now showing signs of a further technical bounce. However, the trading instrument is facing a strong resistance zone. After breaking above 1.1926, the pound could face the top of the downtrend channel and 1/8 Murray at around 1.1962.
A daily close and consolidation above 1.1962 for the pound could start a bullish sequence and the currency pair could reach the 200 EMA at around 1.2209. This zone is a strong resistance. Once it is reached, a technical correction could occur.
The eagle indicator is giving a positive signal. Thus, the odds are that the pound sterling may continue the upward movement in the coming days.
The market sentiment report shows that there are 76.09% of traders who are buying a pound and 23.91% who are selling. This is a sign that a technical bounce could be seen in the coming days, but any attempt to rally higher will be an opportunity to sell.
Our trading plan for the next few hours is to buy the pound should it consolidate above 1.1926. On the other hand, given that some fundamental news will occur in the next few hours, it is better to wait for a rebound at around 1.1950 in order to buy the pound with targets at 1.1962 and 1.2207.
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