On the hourly chart, the GBP/USD pair has reversed in favor of the US dollar and has settled below the corrective level of 127.2% (1.2440). This level was a significant barrier to the further decline of the British pound, but now it has been overcome. Thus, the decline in quotes may continue toward the next level at 1.2342. A rebound from the 1.2440 level from below will only increase the probability of a new decline. A small rise in the pound can be expected in the event of a close above 1.2440, with a target at 1.2513.
The waves on the British pound are as eloquent as on the euro. We have seen two upward waves that could have been the beginning of a bullish trend, but the bears quickly took the initiative, and now we are observing a new bearish trend. The last downward wave broke the previous low, and there are no signs of the end of the bearish trend at the moment.
The British pound declined yesterday, more as a companion than due to the background information. Now, the bulls will be counting on support from the Bank of England and the Fed next week. For this to happen, the Fed should not raise interest rates, and the Bank of England should raise them. Even such a scenario does not guarantee the pound's growth, but in this case, the bulls will at least have grounds to enter the game. As I mentioned in the article on EUR/USD, growth will only occur if the market sees reasons to buy the euro (or pound), regardless of the background information. Therefore, it is expedient to proceed with the option of further decline until the first signs of a trend reversal begin to appear.
On the 4-hour chart, the pair continues to decline despite the earlier breakout above the descending trend corridor. Two rebounds from the 1.2450 level worked in favor of the British pound, but the rise was very weak. A stronger rise in the British pound can only be expected if the quotes settle above the corridor. Closing the pair below the 1.2450 level increases the chances of a further decline of the British pound towards the next Fibonacci level at 50.0% (1.2289).
Commitments of Traders (COT) Report:
The sentiment among "Non-commercial" traders in the past reporting week has become less "bullish." The number of long contracts in the hands of speculators decreased by 4498 units, and the number of short contracts decreased by 2481 units. The overall sentiment of major players remains "bullish," with a twofold gap between the number of long and short contracts: 92 thousand versus 46 thousand. The British pound had good prospects for further growth a few weeks ago, but now, many factors have favored the US dollar. I do not expect a strong rise in the British pound soon. Over time, the bulls will continue to get rid of buy positions. The Bank of England can only change the market situation if it raises interest rates longer than planned.
Economic Calendar for the US and the UK:
US - Industrial Production (13:15 UTC).
US - University of Michigan Consumer Sentiment Index (14:00 UTC).
On Friday, the economic calendar contains two moderately significant entries. In the remaining part of the day, the impact of the information background on market sentiment may be weak.
Forecast for GBP/USD and trader recommendations:
Selling the British pound was possible on a close below the 1.2440 level, with a target of 1.2342. Today, selling can be considered a rebound from the 1.2440 level with the same target. Today's requirement for buying is a close above the 1.2440 level with a target of 1.2513.
