On the hourly chart, the GBP/USD pair on Wednesday fell to the Fibonacci level of 76.4% (1.2720). There wasn't a clear rebound from this level, but the pair still reversed in favor of the pound and began a new rise toward the corrective level of 61.8% (1.2801). The quotes may not reach the indicated mark, as the three previous waves ended lower. Thus, the rise might end somewhere around the 1.2784 level, followed by a new drop with targets at 1.2720 and 1.2690.
The waves have been indicating horizontal movement for several days in a row. Peaks and lows are rarely breached; all waves are the same size. Therefore, there will be a new trend once the pair breaks out of the clear sideways range. Today, as I mentioned, there's an important inflation report and a slightly less significant report on the number of unemployment benefit claims in the USA. The latter has fewer chances to affect trading, while the former has excellent prospects.
However, I'd like to highlight another important point. The rise of the pound and the euro on Thursday morning may indicate that the market is anticipating a decrease in inflation rather than an increase. What does this mean? Traders sell the dollar in advance because they believe inflation will decrease or remain unchanged. If official statistics reveal a decline in inflation, this event is already priced in. If it rises, there will be a strong dollar surge, which would fit the current wave picture. Today, I expect the continuation of horizontal movement with a return to the 1.2720 and 1.2690 levels.
On the 4-hour chart, the pair reversed in favor of the pound after forming a bullish divergence at the CCI indicator. There was also a consolidation above the Fibonacci level of 61.8% (1.2745), allowing for continued growth towards the 1.2846 level. Currently, there are no emerging divergences observed in any of the indicators. I don't believe in a strong pound's rise under these circumstances. The wave situation on the hourly chart suggests a horizontal, weak movement and, given today's context, a decline.
Commitments of Traders (COT) Report:
The sentiment of the "Non-commercial" category of traders has become less bullish over the past 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 mood of major players remains bullish, with a twofold gap forming between the number of long and short contracts: 92,000 versus 42,000. The pound had decent prospects for continued growth recently, but many factors have favored the US dollar. Expecting a new strong rise in the pound is becoming increasingly difficult. The market doesn't always consider all the factors supporting the dollar, and the pound has recently been growing solely based on expectations of further rate hikes by the Bank of England.
News calendar for the US and UK:
US - Consumer Price Index (CPI) (12:30 UTC).
US - Initial Unemployment Benefit Claims (12:30 UTC).
On Thursday, the economic events calendar contains two important entries. For the rest of the day, the influence of the news background may be present.
GBP/USD forecast and advice for traders:
I recommend new pound sales on a rebound from the 1.2801 level (or 1.2784) on the hourly chart with targets of 1.2720 and 1.2690. There's only one possible signal for purchases today – a close above the 1.2801 level. However, be cautious – the pound's growth might be very short-lived.
