Early in the European session, the British pound (GBP/USD) is trading around the psychological level of 1.1500. We can see on the 1-hour chart that the pair is trading inside the downtrend channel which has been underway since October 26.
GBP/USD pulled back from the highs of 1.1565 seen yesterday in the opening of the American session. The pair has found buyers at 1.1450, allowing the pair to return to levels close to 1.1500.
Amid the positive sentiment for the GBP, seen during the Asian and European sessions, the instrument rose to the 21 SMA on the 4-hour chart (1.1551). Positive sentiment faded during the American session due to some upbeat data released in the US.
The British pound is likely to trade within a range between 1.1501 (21 SMA) and 1.1460 (200 EMA) in the coming hours. Due to the fact that the market is awaiting the decision of the US Federal Reserve regarding the increase in the interest rate, the market could enter a consolidation phase.
The market has already priced in the rate hike of 0.75%. However, speculators will be attentive to the speech that will be given after this announcement. If the Central Bank is more determined to raise its interest rate in the coming months, it will be bullish for the dollar, so the British pound could fall towards 2/8 Murray at 1.1230.
On the contrary, if the bank hints that it is time to soften the pace of monetary tightening or that the next increases are below 0.75%, it could favor the British pound. Hence, GBP/USD could reach 4/8 Murray at 1.1718 or even reach the psychological level of 1.20.
According to the 1-hour chart, the British pound has strong resistance at 1.1550 and strong support at 1.1420 (bearish channel). In case there is a sharp break in any of these sides, it could be a clear signal to buy or to sell.
The eagle indicator reached the extremely oversold zone. If the pound trades above the 21 SMA or the 200 EMA, we could expect a strong bullish move that could push the price up to 1.1718 (4/8 Murray).
The material has been provided by InstaForex Company – www.instaforex.com