Although the pair is obviously in need of a correction, the pound is actually waiting idly. The economic calendar is basically empty both yesterday and today. This behavior seems somewhat illogical, especially with the upcoming Federal Open Market Committee (FOMC) meeting, where officials at the Federal Reserve might raise rates. But even if that doesn't happen, the U.S. central bank is likely to announce its firm intention to further tighten monetary policy, given that inflation in the United States has been accelerating for two consecutive months. Meanwhile, the dollar remains significantly overbought and this poses problems. So, ahead of such a significant event, it would be interesting to see if the market decides to correct this imbalance somewhat, in order to provide the dollar with added impetus. And if the situation does not change today, the overbought dollar is at risk of rising even further, which creates a potential risk of a deeper and sudden correction in the near term.

The GBP/USD pair has entered a state of consolidation near the base of the downtrend. This reflects traders' prevailing interest in short positions despite the clear signal that the pound is oversold.

On the daily chart, the RSI technical indicator has reached the oversold territory, which shows that short positions have accumulated. In the intraday period, indicators are also close to oversold status.

On the four-hour chart, the Alligator's MAs are headed downwards, aligning with the bearish cycle.

Outlook:

The ongoing consolidation phase can serve as a period where market participants reposition. When this consolidation ends, speculative price movements may occur. If the pound subsequently declines, sellers should pay attention to the support area around 1.2300/1.2350, as this could lead to a decline in selling volumes. In this case, the pair could correct higher, and lead to the recovery process in the pound.

However, we might see a technical signal that indicates the continuation of the downtrend, along with a shift in medium-term sentiment, if the price stays below 1.2300 on the daily chart.

The complex indicator analysis unveiled that in the short-term, mid-term, and intraday periods, technical indicators are pointing to bearish sentiment.