On the hourly chart, the GBP/USD pair on Friday displayed unfavorable movements, completely ignoring the corrective level of 61.8% (1.2715). Unfortunately, this is the nature of movement within a horizontal corridor. Bulls and bears continue tug-of-war, with no clear advantage for either side. Today, the British pound may equally likely show both growth and decline.
The wave situation remains very ambiguous. Trends are currently quite short-term, often featuring solitary waves. The bullish sentiment among traders persists because the British pound has not fallen below the 1.2584 level. The last downward wave once again did not break the 1.2611 level, around which the lows of all previous waves are located. The new set of upward waves aims for the zone of 1.2788–1.2801, but I have significant doubts that the bulls will be able to break through it. Thus, the sideways movement will continue until the pair exits the zone between 1.2584 and 1.2801.
The background information on Friday could be clearer to interpret in favor of the dollar or the pound. All we saw were the Personal Consumption Expenditures (PCE) Price Index (one of the inflation derivatives) and reports on American consumers' personal income and spending. The PCE Price Index rose 2.9% y/y, roughly in line with the overall inflation rate. Compared to November, the index slowed by 0.3%. It can be said that it hardly supported the American currency, but I will remind you that the key indicators are inflation and core inflation, not their derivative indices.
Personal incomes of US consumers increased by 0.3%, and personal spending by 0.7%. The second indicator exceeded traders' expectations by almost two times. The more Americans spend, the more difficult it is for inflation to continue its decline, which supports bears and the US dollar.
On the 4-hour chart, the pair has made another rebound from the 1.2745 level and a reversal in favor of the US dollar, allowing it to return to the 1.2620 level. No impending divergences are observed with any indicators today, and the quotes have abandoned the ascending trend corridor. The trend may continue to shift towards "bearish," but this will take time and will require significant efforts from the bears, particularly closing below the 1.2620 level. The British pound's sideways movement is maintained and visible to the naked eye.
Commitments of Traders (COT) Report:
The sentiment of the "Non-commercial" trader category for the last reporting week has not changed. The number of long contracts held by speculators increased by 6,369 units, while the number of short contracts increased by 5,863. The overall mood of major players shifted to "bearish" several months ago, but at present, bulls have a significant advantage. There is an almost twofold gap between the number of long and short contracts: 73 thousand versus 41 thousand.
The British pound still has excellent prospects for a decline. I believe that bulls will continue to buy positions over time, as all possible factors for buying the British pound have already been worked out. The rise we have seen in the last three months is corrective. The bulls have been unable to break the 1.2745 level for over a month. However, the bears are quick to go on the offensive and cannot cope with the zone between 1.2584 and 1.2611.
News Calendar for the US and the UK:
On Monday, the economic events calendar contains a few interesting entries. The influence of the information background on market sentiment will be absent today.
GBP/USD Forecast and Trader Recommendations:
I will not consider selling the British pound today, as the price is stubbornly moving towards 1.2788, ignoring the 1.2715 level. However, I do not see any signals to buy at the moment. In the current circumstances, it is better to wait a bit. For example, wait for a rebound from or closing above the 1.2788–1.2801 zone. Or wait for the results of the Bank of England and the Federal Reserve meetings.
