FX.co ★ Trading plan for GBP/USD for May 06, 2022

Technical outlook:

GBP/USD reversed sharply during the New York Session on Thursday sliding through fresh swing lows around 1.2325. The currency pair erased all its gains from a rally triggered by the FOMC meeting results on Wednesday. It dropped by 300 pips before finding some bids. It is seen to be trading around the 1.2360 level at this point in writing. It is expected to decline below the resistance level of 1.2640 soon.

GBP/USD's drop has been accompanied by a strong bullish divergence on the daily RSI as present here. This could be taken as a potential trend reversal as bulls remain poised to be back in control soon. Keep in mind that prices are still testing the backside of its trendline resistance, which acts as support now (1.2300-1.2500).

GBP/USD is heading to the resistance level around 1.2640, followed by 1.3150 and higher, while near term support is seen just below the 1.2300 mark. A push through 1.2640 will confirm that a meaningful bottom is in place at 1.2325 and bulls are now back in control. It would be interesting to see how traders react to Friday's Non-farm payrolls.

Trading plan:

Preparing for a potential rally through 1.2640 and 1.3000 against 1.2200

Good luck!