The British Pound vs. US Dollar (GBP/USD) is bouncing back after falling to lows on May 19 at 1.2429 in the European session.

Early in the American session, the pound was trading around the key level of 1.2500, this level coincides with the 21 SMA on 1-hour charts.

A little further up we can see the 200 EMA located at 1.2530 which could exert bearish pressure and become a resistance, only if it fails to break or consolidate above this level.

In the chart above, we can see the formation of a bullish pennant technical pattern. This pattern has a bullish target, the projection is equal to the distance of the size of the flagpole. Therefore, a break and consolidation above 1.2500 could reach the zone 3/8 Murray at 1.2573 -1.2590.

Escalating political tensions in the UK could hamper demand for the GBP/USD pair and it could drop again. Yesterday, British Prime Minister Boris Johnson avoided the vote of no confidence. 148 deputies voted against Johnson, while 211 lawmakers voted for him.

The market risk sentiment is changing rapidly, this is seen with the fall in US bond yields and the weakness of the US dollar. This negative trend could favor the British pound and manage to consolidate above 1.26 and even reach 4/8 Murray at 1.2695.

Our trading plan for the next few hours is to buy the British pound above 1.2505 (21 SMA) or wait for a sharp break above the 200 EMA at 1.2530, with targets at 1.2573 (3/8), 1.26 and 1.2695 (4 /8). The eagle indicator is showing a positive signal which supports our bullish strategy.