On the hourly chart, the GBP/USD pair on Wednesday consolidated above the level of 1.2611 and rose to the corrective level of 23.6%-1.2690. A rebound from this level will favor the American currency and some decline towards the level of 1.2611. Consolidation above the resistance zone of 1.2690–1.2705 will increase the likelihood of continued growth towards the next resistance zone of 1.2788–1.2801.
The wave situation remains unchanged. The last downward wave ended on May 9th and did not break the low of the previous wave, while the new upward wave broke the peak on May 3rd. Thus, the trend for the GBP/USD pair has changed to "bullish." A "bullish" trend may not be long-lasting, as in my opinion, the current information background is not strong enough for the British pound to see several more upward waves. However, the first sign of the end of the "bullish" trend will appear only when a new downward wave manages to break the low of the previous wave from May 9th. For this, the British pound needs to drop by 240–250 points from the current price.
The pound managed to show a 100-point rise after the US inflation report, which contained nothing unexpected. Both core and headline inflation decreased exactly as traders expected. The fact of inflation slowdown in the US is not surprising, as even in America, consumer prices cannot constantly accelerate with the maximum FOMC rate. In my view, there was a slight correction in inflation in April. Slowing consumer prices does not mean it will continue in May. Thus, I do not consider it expedient to increase the probability of a quick transition to the Fed's monetary policy easing after this report. However, bulls took advantage of the opportunity provided and continued to fully dominate the market. There is nothing to be done about it.
On the 4-hour chart, the pair consolidated above the level of 1.2620, which allows us to count on further growth towards the corrective level of 1.2745. It is difficult for me to imagine an information background that would continue to support bulls further. However, it cannot be denied that the pound may continue to rise as it has broken out of the descending trend corridor. A rebound from the level of 1.2745 may slightly cool the enthusiasm of the bulls, who have rallied strongly.
Commitments of Traders (COT) report:
The sentiment of the "non-commercial" trader category became less "bearish" over the past reporting week. The number of long contracts held by speculators increased by 8109 units, while the number of short contracts increased by 932 units. The overall sentiment of large players has changed, and now bears dictate their terms in the market. The gap between the number of long and short contracts is 22 thousand: 51 thousand versus 73 thousand.
In my view, the prospects for a decline in the British pound are still preserved. Over the past 3 months, the number of long positions has decreased from 83 thousand to 51 thousand, while the number of short positions has increased from 49 thousand to 73 thousand. I believe that over time, bulls will continue to liquidate buy positions or increase sell positions, as all possible factors for buying the British pound have already been worked out. Bears have demonstrated their weakness and complete reluctance to advance over the past few months, however, I still expect the pound to start a stronger decline.
News calendar for the US and the UK:
US - Building Permits (12:30 UTC).
US - Housing Starts (12:30 UTC).
US - Philadelphia Fed Manufacturing Index (12:30 UTC).
US - Initial Jobless Claims (12:30 UTC).
Thursday's economic events calendar contains several entries of equal significance. The impact of the information background on market sentiment for the remaining part of the day will be moderate.
GBP/USD forecast and trader advice:
Sales of the British pound are possible on a rebound from the resistance zone on the hourly chart (1.2690–1.2705), with targets at 1.2611 and 1.2565. The pound cannot keep rising forever. Purchases could be considered on a rebound from the level of 1.2464, on close above the level of 1.2565, with targets at 1.2611 and 1.2690. All targets have been hit. New purchases - on closing above the level of 1.2705 with a target of 1.2788–1.2801.
