Early in the American session, the British pound (GBP/USD) is trading around 1.2479. We see a sharp drop below the 21 SMA. The instrument is approaching the 6/8 Murray support zone located at 1.2451.
Fundamentally, US retail sales data came out negative for the US dollar. Due to this, the market reacted against the consensus because this scenario had been taken for granted.
The market responded in favor of the US dollar, so we saw a technical correction. In the next few hours, a technical bounce could occur towards the psychological level of 1.25 which will be seen as a signal to sell.
As long as the British pound trades below the 21 SMA located at 1.2522, it will be seen as a signal to sell with targets at the 200 EMA at 1.2444 and the 5/8 Murray at 1.2329.
According to the 1-hour chart, the British pound has found strong resistance around 1.2540. Therefore, as long as it trades below this area, we could see the market continue to fall over the next few days with targets at 1.23.
A daily close above 1.2530 could be seen as a positive outlook for GBP/USD and the instrument could reach 7/8 Murray at 1.2573.
On the contrary, a drop below 1.2440 (200 EMA) could be seen as a clear signal to sell. We suppose the beginning of a trend change. Hence, GBP/USD could fall towards the psychological level of 1.20. The eagle indicator is showing an overbought signal that supports our bearish strategy.
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