On the hourly chart, the GBP/USD pair failed to continue its decline on Monday but began today's trading by consolidating below the upward trend channel. The consolidation remains weak, but it is still a positive sign. The information background will play a significant role for the pair this week, so trading decisions should not be based solely on graphical analysis. A further decline in quotes towards the 127.2% Fibonacci level at 1.3054 may continue.
The wave structure is clear. The last completed downward wave failed to break the low of the previous wave, while the last upward wave managed to break the peak of the previous wave. Thus, we are currently dealing with a clear "bullish" trend, but the waves are so large that any trend change might be identified only with a significant delay. I simply don't see internal waves to rely on for identifying a trend reversal. However, there is an upward trend channel.
There was no significant information background on Monday, but today in the second half of the day, the ISM Manufacturing PMI will be released in the U.S. I have already mentioned it, and there will be no other data today. Therefore, until this report is released, I expect relatively low market activity with a continued downward bias. However, the situation could shift significantly in the second half of the week. If the JOLTS or ADP reports are unlikely to greatly disappoint traders, the unemployment and payroll reports might. The dollar is still growing, but this process could end quickly and unexpectedly. The market continues to expect decisive action from the Fed in September. However, it will be challenging for the dollar to sustain growth over a prolonged period unless U.S. economic data starts to show stronger figures. This would lead the market to believe that the Fed might slow the pace of rate reductions.
On the 4-hour chart, the pair consolidated above the 1.3044 level. However, the CCI indicator has been warning of a "bearish" divergence for more than a week, and the RSI indicator has been in overbought territory for a week, which doesn't happen often. As a result, a reversal in favor of the U.S. currency occurred, and a decline towards the 1.3044 level began. A rebound in quotes from this level would suggest a potential resumption of growth towards the 76.4% corrective level at 1.3314.
Commitments of Traders (COT) Report
The sentiment of the "Non-commercial" category of traders became significantly more "bullish" in the last reporting week. The number of long positions held by speculators increased by 26,529, while the number of short positions increased by 4,109. Bulls still have a solid advantage. The gap between the number of long and short positions is almost 90,000: 152,000 against 62,000.
In my opinion, the British pound still faces the prospect of a decline, but the COT reports suggest otherwise. Over the past three months, the number of long positions has grown from 51,000 to 152,000, while the number of short positions has decreased from 74,000 to 62,000. I believe that over time, professional players will begin to reduce their long positions or increase their short positions, as all potential factors for buying the British pound have already been priced in. However, it's important to remember that this is just a hypothesis. Graphical analysis suggests a likely decline in the near future, but the current trend remains clearly "bullish."
News Calendar for the U.S. and the U.K.
- U.S. – Manufacturing PMI (13:45 UTC)
- U.S. – ISM Manufacturing PMI (14:00 UTC)
The economic events calendar for Tuesday contains two entries. The impact of the information background on market sentiment today may be present, but likely in the second half of the day.
Forecast for GBP/USD and Trading Tips
Selling the pair was possible on a rebound from the 1.3258 level on the hourly chart with a target of 1.3054. These trades can currently be kept open. I would not rush into new purchases until the 1.3054 level is tested.
Fibonacci levels are constructed from 1.2892–1.2298 on the hourly chart and from 1.4248–1.0404 on the 4-hour chart.
