GBP/USD fell after the April inflation data from the United States, which showed higher-than-expected figures. The pair left a triple bottom pattern around 1.2276.
The Consumer Price Index (CPI) rose 8.3% from a year ago, more than the 8.1% expected, although less than the 8.5% the previous month, which had been the highest reading in 41 years. The data activated the rally of the dollar and caused a fall in the British pound.
Currently, GBP/USD is trading around 1.2299 below the 21 SMA located at 1.2326. Given that the inflation data caused strong volatility, it is likely that the markets have already valued this increase. Therefore, the pound is expected to have a strong recovery in the coming days and could reach 4/8 Murray at 1.2695.
According to the 4-hour chart, we can see that GBP/USD has formed a triple bottom pattern and a bearish wedge. This pullback could be considered as part of a confirmation of the technical pattern and could be a positive sign for the British pound.
Our trading plan is to wait for the pound's consolidation above the 21 SMA located at 1.2326. Above this level, we could buy with targets at 3/8 Murray at 1.2451 and even up to 200 EMA at 1.2775.
Having made a strong rebound due to the US inflation data, the dollar index (USDX) is making a technical correction. It is likely to go ahead with a technical correction until the end of the month.
In about 15 days, the US dollar (USDX) is likely to have a technical correction and this could open the door for the British pound's recovery until the end of May on condition the pair remains above 1.2326.
The eagle indicator is giving a positive signal and that would be an opportunity to continue buying the pound in the coming hours. If the pound manages to consolidate above 1.2300 in the short term, it is likely to reach 1.27 and even the psychological level of 1.30.