On the hourly chart, the GBP/USD pair continued to trade slightly above the 1.2690-1.2705 zone on Wednesday and Thursday. Thus, the pair can continue moving upward towards the next resistance zone 1.2788 1.2801. Securing the pair's rate below the 1.2690-1.2705 zone will favor the US dollar and some decline towards the level of 1.2611. The bulls have undisputed dominance in the market.
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 from May 3. Thus, the trend for the GBP/USD pair has changed to "bullish" and remains so. The "bullish" trend may be short-lived, as the current information background is not strong enough for the pound to see several more upward waves. However, the first sign of the end of the "bullish" trend will only appear when a new downward wave breaks the low of the previous wave from May 9. The pound must fall 320-340 pips from the current price for this.
The pound continues to grow almost without stopping. Even today, when rather weak business activity indices were released in the UK, it could not show a slight decline. Bears are absent from the market right now, and bulls can do whatever they want. Credit to them – they are not taking full advantage of the situation; otherwise, we would already see the pair above 1.3000. However, why should the bulls rush if the bears do not show active efforts? The resistance zone of 1.2690-1.2705 was overcome with particular ease, yet it formed a concrete support for the pound. The pair has been unable to fall below this zone for the fourth consecutive day, even though today's information background supported the pound's decline.
On the 4-hour chart, the pair rose to the correction level of 1.2745. A rebound from this level may slightly cool the bulls' enthusiasm, which has been very high lately, and allow the pair to start falling towards the level of 1.2620. Securing the pair's rate above this level will give even more confidence to bullish traders, who may continue to push towards the level of 1.3044. No impending divergences are observed in any indicator today.
Commitments of Traders (COT) Report:
The sentiment of the "Non-commercial" category of traders became less "bearish" over the last reporting week. The number of Long contracts held by speculators decreased by 3,103 units, while the number of Short contracts decreased by 4,841. The overall sentiment of major players has changed, and now bears dictate their terms in the market. The gap between the number of Long and Short contracts is 20,000: 48,000 against 68,000.
The pound still has prospects for a decline. Over the last three months, the number of Long positions has decreased from 83,000 to 48,000, while the number of Short positions has increased from 49,000 to 68,000. Over time, bulls will continue to reduce their Buy positions or increase their Sell positions, as all potential factors for buying the British pound have already been realized. Bears have shown their weakness and complete reluctance to take the offensive in recent months, but I still expect the pound to start falling.
News Calendar for the US and UK:
- UK - Services PMI (08:30 UTC).
- UK - Manufacturing PMI (08:30 UTC).
- US - Initial Jobless Claims (12:30 UTC).
- US - Services PMI (13:45 UTC).
- US - Manufacturing PMI (13:45 UTC).
On Thursday, the economic events calendar includes three entries, some already available to traders. The information background will weaken market sentiment for the rest of the day.
Forecast for GBP/USD and Trading Tips:
The pound's sales are possible in case of a rebound from the resistance zone on the hourly chart at 1.2788-1.2801, with a target of 1.2690-1.2705. Selling can also be considered if the pair closes below the 1.2690-1.2705 zone, with a target of 1.2611. Buying could be considered upon closing above the 1.2705 level, with a target of 1.2788-1.2801. Currently, these trades can be kept open.
