On the hourly chart, the GBP/USD pair continued its upward movement on Monday, aiming towards the corrective level of 161.8% at 1.3259. As of Tuesday morning, the upward trend continues. A rebound from the 1.3259 level may result in a slight decline in the pound, though this would negate the "bearish" trend. It would then be logical to expect closing quotes above 1.3259 and further growth towards the next level of 1.3357.
The wave situation does not raise any concerns at the moment. The last completed downward wave broke the low of the previous wave, while the last upward wave failed to surpass the peak of the previous wave, which was at 1.3264. Thus, we are currently dealing with a "bearish" trend. The new upward wave must break the peak from September 6 for the trend to turn "bullish" again. There is not much distance left to that peak.
There was no significant news on Monday, but bulls maintained their position. The upward movement continues on expectations of maintaining the current monetary policy parameters of the Bank of England and easing from the Fed. Currently, the GBP/USD pair is near an inflection point. A rise of just a few dozen points will lead to a trend change to "bullish." After that, further growth is expected, but on Wednesday and Thursday, the U.S. and U.K. regulators will hold meetings. The slightest surprise from either of them could prompt bearish action. The momentum for the pound remains strong. If the trend shifts to "bullish," even a 200-point decline will not revert it back to "bearish." A 200-point drop is quite possible on Wednesday and Thursday. Thus, this week, traders should exercise caution rather than activity. Buying volumes are decreasing, indicating the weakness of current bullish intentions. However, the Bank of England and the Fed could provide them with renewed strength.
On the 4-hour chart, the pair has rebounded from the 1.3044 level, reversing in favor of the pound and continuing the upward movement towards the 76.4% Fibonacci level at 1.3314. The CCI indicator has already formed two "bearish" divergences, suggesting a potential decline today. However, with the current bullish momentum, a third "bearish" divergence may also form. The British pound is overbought, as indicated by the RSI.
Commitments of Traders (COT) Report:
The sentiment among non-commercial traders over the last reporting week has become significantly less bullish. The number of long positions held by speculators decreased by 18,701, while short positions only decreased by 911. Bulls still maintain a solid advantage. The gap between the number of long and short positions stands at 90,000: 142,000 versus 52,000.
In my view, the pound still holds potential for decline. However, the COT reports currently suggest otherwise. Over the last three months, the number of long positions has increased from 102,000 to 142,000, while short positions have decreased from 58,000 to 52,000. I believe that over time, institutional traders may start offloading long positions or increasing short positions, as all possible factors for purchasing the British pound have already been priced in. However, it is important to note that this is merely a hypothesis. Technical analysis suggests a "bearish" trend at the moment, but it is too unstable.
News Calendar for the U.S. and U.K.:
- U.S. – Change in retail sales (12:30 UTC).
- U.S. – Change in industrial production (12:30 UTC).
On Tuesday, the economic calendar includes two entries. The impact of the information background on market sentiment for the remainder of the day is likely to be limited.
Forecast for GBP/USD and Advice for Traders:
Sales of the pair are possible today, but I do not see levels around which trading signals could be sought, except for 1.3259. I would not rush into buying even after closing above 1.3054, as the trend for the pound is still "bearish."
Fibonacci levels are drawn from 1.2892 to 1.2298 on the hourly chart and from 1.4248 to 1.0404 on the 4-hour chart.
