On the hourly chart, the GBP/USD pair resumed upward movement on Tuesday and ended near the corrective level of 38.2% (1.2477). A bounce of quotes (consolidation) from this level will favor the US currency and the resumption of the decline towards the Fibonacci level of 23.6% (1.2321). Closing the pair's rate above the level of 1.2513 increases the probability of further growth towards the next corrective level of 50.0% (1.2603).
The wave situation remains ambiguous. For five days, we observed the formation of a downward wave, which did not even come close to the last low. Now, for the third consecutive day, we are witnessing the formation of an upward wave that has already surpassed the last peak. The waves are currently too large and often alternate with very small waves. Thus, concluding the trend based on waves currently needs to be revised. A new downward wave may begin, which will take several days to form. For the trend to turn "bearish," a pair's fall below the level of 1.2186 is required.
The information background on Tuesday was very strong, but essentially, it was just one report. In the UK, reports on wages and unemployment came out in the morning, but traders showed no interest. The same applies to the inflation report released a couple of hours ago. Although the Consumer Price Index immediately dropped to 4.6%, we did not see the same reaction as yesterday to the report on American inflation. Yesterday's rise in the British pound was only related to the US inflation report. Traders were confident that the Consumer Price Index would drop to 3.3%, and they missed it by a little. Inflation in the US fell to 3.2%. The traders' reaction was too strong. I expect the British pound to fall and the dollar to rise by the end of the week.
On the 4-hour chart, the pair reversed in favor of the British pound and consolidated above the levels of 1.2289 and 1.2450. Thus, the upward movement may be continued towards the next level of 1.2620. However, closing the pair's rate below the level of 1.2450 will work in favor of the US currency and a new decline towards the corrective level of 50.0% (1.2289). No imminent divergences are observed in any of the indicators today.
Commitments of Traders (COT) report:
The sentiment of the "Non-commercial" trader category for the last report is slightly less "bearish." The number of long contracts in the hands of speculators decreased by 6180 units, and the number of short contracts decreased by 10,299 units. The overall sentiment of major players has long changed to "bearish," and the gap between the number of Long and Short contracts is increasing, but now in the opposite direction: 57 thousand against 74 thousand. The British pound still has excellent prospects to continue falling. I do not expect a strong rise in the pound soon. Over time, bulls will continue to get rid of buy positions, as was the case with the euro. The recent rise we've seen in the past weeks is corrective.
News Calendar for the US and the UK:
UK – Consumer Price Index (07:00 UTC).
US – Retail Sales Volume (13:30 UTC).
US – Producer Price Index (PPI) (13:30 UTC).
On Wednesday, the economic events calendar contains three interesting entries, but the most important of them has already been announced. The impact of the information background on market sentiment for the remaining part of the day may be weak.
Forecast for GBP/USD and trader recommendations:
I recommend selling the British pound on a rebound from 1.2477 on the hourly chart with targets at 1.2321 and 1.2250. I do not advise considering new purchases after yesterday's rise.
