On the hourly chart, the GBP/USD pair executed a return to the corrective level of 76.4% (1.2720) yesterday, rebounded from it, and rose to the previous price peak. It failed to break this peak, but more on that shortly. A new turn favoring the US currency was executed, starting the falling process toward the Fibonacci level of 76.4%. A rebound from it, once again, will allow expectations of a rise in the GBP of 70-80 points. Consolidation below 1.2720 will increase the chances of continued decline towards the next corrective level of 100.0% (1.2590).
What are the waves telling us now? We saw one upward wave that did not break the last peak. One downward wave that also did not break the last low. And another upward one that didn't break the last peak. This indicates a fading trend. A bearish trend. However, fading doesn't necessarily have to end in completion. For instance, if there's a close below the 1.2720 level, the bearish trend will be considered intact. If there's a close above 1.2801, then a stronger rise from the GBP can be expected.
The news background on Monday and Tuesday is absent. This adequately explains the low activity of traders. The next significant report is on Thursday. Thus, I expect the graphic picture to stay the same today or tomorrow. The pair's movements will depend on the US inflation reports and the UK GDP data on Thursday and Friday. There's every reason to expect that inflation will rise, which can support bearish traders. There's every reason to anticipate that GDP won't increase, which again will support the bears. By the end of the week, a new fall of the British pound is likely, but paying close attention to signals, waves, and divergences is essential.
On the 4-hour chart, the pair favored the GBP after forming a bullish divergence at the CCI indicator. There was also a consolidation above the Fibonacci level of 61.8% (1.2745), which allows expectations for a continuation of growth towards the 1.2846 level. No looming divergences are observed at the moment from any indicator. I don't believe in a strong GBP rise under the current conditions.
Commitments of Traders (COT) report:
The sentiment of the "Non-commercial" category of traders has become less bullish over the last reporting week. The number of long contracts held by speculators decreased by 13,323 units, while the number of short contracts decreased by 3,890. The overall sentiment of major players remains bullish, and a twofold gap has formed between the number of long and short contracts: 92,000 against 42,000. The GBP had good prospects for continued growth recently, but many factors have favored the US dollar. Expecting a new strong rise in the British pound is becoming more and more challenging. The market doesn't always consider all the supporting factors for the dollar, and recently, the pound has been rising only on the expectations of continuous rate hikes by the Bank of England.
News calendar for the US and UK:
On Tuesday, the economic events calendar does not contain any noteworthy entries. For the remainder of the day, the influence of the news background will be absent.
GBP/USD forecast and advice for traders:
I advise new sales of the GBP on a rebound from the 1.2801 level on the hourly chart with targets at 1.2720 and 1.2620. Or upon closing below 1.2720. Purchases of the GBP are possible on a rebound from the 1.2720 level on the hourly chart, with targets at 1.2790 and 1.2801.
