The GBP/USD pair continued its upward movement on the hourly chart on Tuesday, rebounding from the corrective level of 61.8% (1.2801). Consequently, the pair closed above the Fibonacci level of 50.0% (1.2866), significantly increasing the likelihood of further growth towards the levels of 1.2931 and 1.3011.
The waves also indicate a shift in the trend to bullish. The currently forming upward wave has surpassed the previous peak, while the last downward wave did not breach the low of the preceding descending wave. We have received two signals indicating the end of the bearish trend. There are also signs of the bearish trend ending for the euro currency, suggesting that both pairs could be turning towards new growth.
There was no significant news or event about the British pound yesterday or today. Traders must wait for the FOMC's evening meeting, so movements may remain calm and measured until then. Once it is officially confirmed that the interest rate has been raised to 5.5%, the market may respond with growth, but subsequently, a decline in quotes is likely to follow, as is often seen during central bank meetings. If the trend has already turned upward, any subsequent pullback will not affect it.
Special attention should be paid to Jerome Powell's speech. If he announces his readiness to raise the rate again in autumn during the press conference, the growth of the British pound may be short-term for a few days. Otherwise, considering the Bank of England's rate hike next week, we may witness a new bullish trend.
On the 4-hour chart, the pair rebounded from the ascending trendline after forming a bullish divergence on the CCI indicator. As a result, a new upward movement toward the 1.3044 level has begun. Simultaneously, the CCI indicator has a looming bearish divergence, which could reverse the pair downward. However, in that case, selling should only be considered after the trendline breach is confirmed. The next few days will be crucial in determining the future trend.
According to the Commitments of Traders (COT) Report:
The sentiment of the "Non-commercial" traders category has become more bullish over the last reporting week. Speculators' long contracts increased by 23,602 units, while short contracts increased by only 17,936. The overall sentiment among major players remains fully bullish, with a two-fold gap between the number of long and short contracts: 135,000 versus 71,000. The British pound has decent prospects for continued growth. However, the information background from the UK is only sometimes favorable, and bears may take the initiative. Counting on a strong rise in the pound is becoming increasingly difficult. The market has yet to factor in many factors supporting the dollar, whereas the pound has risen lately based on expectations of further rate hikes by the Bank of England.
News Calendar for the USA and the UK:
USA - building permits (12:00 UTC).
USA - new home sales (14:00 UTC).
USA - Federal Reserve interest rate decision (18:00 UTC).
USA - FOMC statement (18:00 UTC).
USA - FOMC press conference (18:30 UTC).
On Wednesday, there are five significant entries on the economic events calendar, which includes reports on the US real estate and construction markets. The background information may heavily influence the rest of the day.
Forecast for GBP/USD and trader advice:
I advised closing GBP sales as the target of 1.2801 was reached, and a rebound occurred from that level. Potential new sales could be considered on a rebound from 1.2931 or after confirmation below the trendline on the 4-hour chart. As for GBP purchases, I suggested considering them on a rebound from the 1.2801 level with the nearest target on the hourly chart and a close above 1.2866 with a target of 1.2931. Holding onto purchases until the evening may also be an option.
