GBP/USD remains below the downtrend channel which has been unfolding since July 29. It is currently trading below the 200 EMA and the 21 SMA with a slightly bearish bias.

Yesterday, the pair reached a high of 1.2130 just at the top of the downtrend channel and then fell to 1.2062. The British pound has strong support at around 1.2060. If you look at the 4-hour chart, it has become a key level of support and resistance since July 21.

If GBP/USD consolidates above the 1.2060 support in the next few hours, a technical bounce could occur to challenge the top of the downtrend channel at around 1.2105. In the case of a failure to break it, we will have an opportunity to sell with targets at 61.8% Fibonacci around 1.1962.

Conversely, if the bullish force prevails and the pair consolidates above the 200 EMA (1.2118), a sharp break of the downtrend channel could occur and the pound could rally towards 4/8 Murray at 1.2207 and up to 5/8 Murray at 1.2329.

Early in the American session, the CPI for July in the United States will be published. The market consensus is that the annual rate fell from 9.1% to 8.7%. A surprise to the upside could trigger a rally in the US dollar, as it would cement expectations of an aggressive rate hike. Consequently, the GBP/USD pair could fall towards the psychological level of 1.2000.

On the 4-hour chart, you can see the line of 50.0% and the 61.8% Fibonacci retracement. These levels will be a key zone to buy in case there is a drop in the pair.

The bottom line is to expect the price consolidation at around 2/8 Murray and 61.8%. Above this zone, there could be a good point to buy with targets at 1.2207 and 1.2329.

The eagle indicator continues to show a bearish signal and the pound is likely to extend its decline as long as it remains trading below 1.2220 (200 EMA).

Our trading plan for the next few hours is to sell below 1.2107 with targets at 1.2060 and 1.2025 (50.0%) as the currency pair could even reach 61.8% at around 1.1962.