The GBP/USD commenced Tuesday's trading session with an attempt to rally, only to relinquish its gains, indicating a potential further decline. The impending release of Consumer Price Index (CPI) figures on Wednesday is set to be a pivotal moment, possibly sealing the fate of the pound, as the market appears inclined toward anticipating higher interest rates.

Interest rates have been a point of focus lately, with the short end of the yield curve displaying sporadic gains over the past few days, lending support to the US dollar. This will continue to be a major driver of where we go not only in this pair, must in most other major pairs as well. The market will also be paying attention to the Bank of England as we see a lot of questions asked about the British economy simultaneously.

Looking at the technical aspects, the 1.2350 level below looms as a significant area of support, potentially serving as the next target. It's worth noting that the market seems to favor a pattern of resistance and selling opportunities amid the current volatility. A break above the 1.25 level could lead to an ascent toward the 50-Day Exponential Moving Average near the 1.2650 level. Such a move could alter the recent market sentiment. Currently, the market hovers around the 200-Day EMA, a level that typically garners considerable attention from a long-term perspective.
 

The Market Seems to be Coiling Up

• Considering the chart's dynamics, expect turbulence and back-and-forth movements.
• Caution in position sizing is advisable to navigate the market's inherent noise effectively. The impending CPI release is poised to exert significant influence over the next couple of days.
• A break below the 1.2350 level could potentially lead to further declines, with targets set at the 1.20 level and possibly the 1.1850 level thereafter.

At the end of the day, this market remains highly attuned to risk appetite as a primary driver. Therefore, it is essential to monitor developments in other markets concurrently. Position sizing should be approached with care, especially in the next 24 hours. Once the CPI data is released and the market stabilizes, consideration can be given to adjusting positions. Currently, the market appears to be coiling up, preparing for the next significant move, and traders are keeping a close watch on the unfolding scenario.

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