On the hourly chart, the GBP/USD pair executed a new reversal in favor of the American currency on Monday, with consolidation below the corrective level of 38.2% (1.2453). Thus, the process of the quotes' decline may continue toward the next level at 1.2370. Consolidation of the pair's rate above the level of 1.2453 would benefit the pound, suggesting some growth towards the level of 1.2517.
The wave situation still presents no questions. The last completed upward wave failed to surpass the previous peak (from March 21), while the new downward wave broke the low of the previous wave (from April 1). Thus, the trend for the GBP/USD pair remains "bearish," with no signs of its completion. The first sign of bulls transitioning to an offensive could be the breakthrough of the peak on April 9, but bulls would need to cover a distance of about 290 pips to reach the zone of 1.2705–1.2715, which is unlikely to happen in the coming days.
In the UK, there were no significant reports or events on Monday, but today, three reports have already been released. Additionally, in the second half of the day, three more reports will be released in the US, and Jerome Powell will give a speech. Therefore, we can expect an interesting day. The unemployment rate in the UK rose to 4.2% in February, which is much higher than traders' expectations. However, the number of new unemployed was +10.9 thousand, lower than forecasts. As for wages, they rose by 5.6%, roughly in line with both forecasts and the previous value. Overall, this package of statistics is neutral for the pound. Yet, strong retail sales were reported in America yesterday, and today, data on the construction market and industrial production might bring positive news. Jerome Powell's speech could bolster the bears further, as his rhetoric is unlikely to soften after the latest US inflation data.
On the 4-hour chart, the pair executed a reversal in favor of the dollar after the formation of a "bearish" divergence in the CCI indicator and a drop to the level of 1.2450. The "bullish" divergence in the CCI indicator has been invalidated. Consolidation of the pair's rate below the level of 1.2450 allows us to anticipate a continuation of the decline towards the next corrective level at 50.0%–1.2289. The descending trend corridor characterizes the current sentiment of traders as "bearish."
Commitments of Traders (COT) report:
The sentiment of the "Non-commercial" trader category became less "bullish" over the last reporting week. The number of long contracts held by speculators decreased by 18352 units, while the number of short contracts decreased by 3190 units. The overall sentiment of major players remains "bullish" but has weakened in recent weeks. The gap between the number of long and short contracts is now less than double: 80 thousand versus 52 thousand.
There are still prospects for a decline in the pound, but over the past 3 months, the number of long contracts has increased from 61 thousand to 80 thousand, while the number of short contracts has hardly changed. Over time, bulls will start to unload their buy positions, as all possible factors for buying the British pound have already been factored in. In recent months, bears have demonstrated their weakness and a complete unwillingness to switch to the offensive, but the US inflation report could give them confidence and strength.
News calendar for the US and UK:
UK – Unemployment Rate (06:00 UTC).
UK – Change in Unemployment (06:00 UTC).
UK – Change in Average Earnings (06:00 UTC).
US – Building Permits (12:30 UTC).
US – Housing Starts (12:30 UTC).
US – Industrial Production Change (12:30 UTC).
US – Federal Reserve Chairman Jerome Powell Speech (17:15 UTC).
Tuesday's economic events calendar contains many entries, some of which are already available. Jerome Powell's speech is the most important among them. The impact of the information background on market sentiment today may be of moderate strength.
Forecast for GBP/USD and trader advice:
Sales of the pound could be initiated if it consolidates below the level of 1.2453 on the hourly chart, with a target of 1.2370. Purchases today are possible if the pair closes above the level of 1.2453 on the hourly chart, with targets of 1.2517 and 1.2584.
