On the hourly chart, the GBP/USD pair returned to the resistance zone of 1.2690–1.2705 on Friday. A rebound from this zone could signal a reversal in favor of the US dollar and some decline towards the 1.2611 level. Consolidation above this zone will increase the likelihood of continued growth towards the next level of 1.2788. There is no reason to believe that a rebound has already occurred.
The wave situation remains unchanged. The last downward wave ended on May 9 and did not break the low of the previous wave, while the new upward wave broke the peak on May 3. Thus, the GBP/USD pair trend has changed to "bullish" and remains so. However, the bullish trend may not last long, as the current informational background does not seem strong enough to push the pound further upward. Nonetheless, the first sign of the end of the bullish trend will appear only when a new downward wave breaks the low of the previous wave from May 9. The pound must fall 250–280 points from the current price for this.
The pound continues to enjoy life. Bulls are attacking almost daily, driving the pound sterling to new heights. At the same time, the bears are extremely weak. The news background is quite ambiguous, with some factors favoring the dollar and others the pound. Therefore, more attention should be paid to the graphical picture. There is an important zone of 1.2690–1.2705, which should be traded in the coming days. There is no informational background today, so the graphical picture will have double significance. It is important to understand that bulls can continue attacking on a wave of optimism for long, even if the informational background does not suggest this. There are no impossible movements in the market.
On the 4-hour chart, the pair has consolidated above the 1.2620 level, allowing us to expect continued growth towards the corrective level of 1.2745. I need help to imagine an informational background that will continue to support the bulls. However, we cannot deny the fact that the pound may continue to rise as it has exited the descending trend corridor. A rebound from the 1.2745 level might cool down the bulls, who have been accelerating recently.
Commitments of Traders (COT) Report:
The sentiment among the "Non-commercial" trader category became less "bearish" last week. The number of long contracts held by speculators decreased by 3103, while the number of short contracts decreased by 4841. The overall sentiment of large players has changed, and now bears are dictating the terms in the market. The gap between the long and short contracts is 20 thousand: 48 thousand against 68 thousand.
The pound still has prospects for decline. Over the past three months, the number of Long contracts has decreased from 83 thousand to 48 thousand, while the number of Short contracts has increased from 49 thousand to 68 thousand. Over time, bulls will continue to reduce their Buy positions or increase their Sell positions, as all potential factors for buying the pound have already been priced. Bears have shown their weakness and complete reluctance to go on the offensive in recent months, but I still expect the pound to start falling.
News Calendar for the US and UK:
On Monday, the economic events calendar contains a few interesting entries. The influence of the informational background on market sentiment for the rest of the day will be absent.
Forecast for GBP/USD and Trading Tips:
Selling the pound was possible on a rebound from the resistance zone on the hourly chart at 1.2690–1.2705, with targets of 1.2611 and 1.2565. The pound cannot rise indefinitely either. Buying can be considered on closing above the 1.2705 level with a target of 1.2788–1.2801. Alternatively, buy on rebounds from the 1.2611 and 1.2565 levels on the hourly chart with a target of the 1.2690–1.2705 zone.
