On the hourly chart, the GBP/USD pair on Wednesday continued its growth process and managed to secure above the corrective level of 76.4% (1.2720). This consolidation did not allow the pair to continue its rise, but today, a second close above this level would allow for growth toward the corrective level of 61.8% (1.2801). At the same time, I still do not expect strong growth from the British pound, as there is no basis for that at the moment.
The latest wave upwards has overlapped with two previous waves. The last peak has been breached, which could be a sign of a trend reversal. However, I would not rush to conclusions, as in the last 2.5 weeks we have seen many such signs, and the movement has been horizontal. I do not rule out the possibility that the pound may grow a little more today, but then resume its decline. I do not expect the pair to go above 1.2801 anytime soon.
Yesterday in the UK, weak unemployment reports were released, along with a strong wage report, and today - a neutral inflation report. The consumer price index dropped in July from 7.9% year on year to 6.8% year on year, but the market was expecting this exact figure. The dollar began to rise again in light of this news, but I do not think the growth will be strong since expectations and reality for inflation matched 100%. Core inflation remained at 6.9%, although the market expected it to fall to 6.8%. This figure could be the reason for the rise of the British pound today.
For the Bank of England, not only the primary inflation indicator is important, but also the core. If core inflation is not decreasing, this could be the reason for a stronger tightening of monetary policy. Thus, traders may bring the pair to the level of 1.2801, but further reasons will be needed to buy the already expensive pound.
On the 4-hour chart, the pair performed a return to the corrective level of 61.8% (1.2745) and a rebound from it with the formation of a "bearish" divergence at the CCI indicator. Therefore, as I said above, I do not expect strong growth from the pair. A reversal in favor of the US dollar and a resumption of the decline towards the level of 1.2485 is more likely. However, a full consolidation above the level of 1.2745 will allow for the continuation of growth in the direction of the level of 1.2846.
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 has decreased by 8936 units, and the number of short contracts has decreased by 6394 units. The overall sentiment of major players remains "bullish," and the gap between the number of long and short contracts has widened to more than double: 83,000 against 36,000. In my opinion, the British pound had good prospects for continued growth a few weeks ago, but now many factors are turning in favor of the US dollar. Expecting a new strong rise in the pound is becoming increasingly difficult. In recent weeks, we have seen bulls reducing their positions, already down almost 50,000. Bear positions are also falling, but the gap between them is only increasing.
News calendar for the US and UK:
United Kingdom - Consumer Price Index (06:00 UTC).
United Kingdom - Producer Price Index (06:00 UTC).
USA - Number of Building Permits Issued (12:30 UTC).
USA - Industrial Production Volume (12:30 UTC).
USA - Publication of FOMC Minutes (18:00 UTC).
On Wednesday, the economic events calendar contains five entries, two of which have already been released. For the rest of the day, the influence of the information background on market sentiment will be weak.
GBP/USD Forecast and Tips for Traders:
Selling the British pound is now possible upon a rebound from the levels of 1.2801 or 1.2745 on the hourly chart. Targets are the nearest levels on the hourly chart. For purchases today, only one signal is possible - closing above the level of 1.2720, but be cautious - the rise of the British pound may be weak.
