On the hourly chart, the GBP/USD pair rose to the 161.8% corrective level at 1.3259, then rebounded from it, fell to 1.3151 and rebounded from that level. Therefore, we can expect a rise back to the 1.3259 level today. Another rebound from this level will favor the U.S. dollar and lead to a decline towards 1.3151. Consolidation above 1.3259 will increase the likelihood of further appreciation of the pound. Closing below 1.3151 will maintain the "bearish" trend.
The current wave structure raises no concerns. The last completed downward wave broke below the previous wave's low, while the last upward wave broke the high of the previous wave, located at 1.3234. However, this breakout occurred during heightened market volatility after an important event, and I do not consider it confirmed. Therefore, we are still dealing with a "bearish" trend. I believe it is better to use the 1.3259 level to determine whether the "bearish" trend will break or persist.
The Fed did everything it could to ensure the dollar's decline, but the U.S. currency held its ground. Today it faces its second test. While the Fed was expected to cut rates regardless, the Bank of England is very unlikely to announce a monetary easing decision today. The U.K. inflation report released on Tuesday showed another increase, making it reasonable for the Bank of England to pause. Traders may interpret this decision as "hawkish," especially against the backdrop of the Fed's easing. Thus, the pound will have support today as well. I believe the U.S. currency still has a chance to rise in the near future, provided it remains below 1.3259. In my view, the future easing of the FOMC's monetary policy will not be as aggressive as the market expects. The trend has not turned "bullish," and the dollar is falling too sharply given the current market sentiment.
On the 4-hour chart, the pair rebounded from the 1.3044 level, reversed, benefiting the pound, and continued to rise towards the 76.4% Fibonacci level at 1.3314. The CCI indicator has already formed two "bearish" divergences, suggesting the potential for a decline. However, with the current strength of the bulls, a third "bearish" divergence could form. The pound remains overbought, as indicated by the RSI since August. Since then, the pound has barely fallen.
Commitments of Traders (COT) Report
Non-commercial traders became significantly less bullish over the past week. The number of long positions held by speculators decreased by 18,701, while the number of short positions fell by only 911. Bulls still hold a solid advantage. The gap between long and short positions stands at 90,000: 142,000 against 52,000.
In my view, the pound still faces prospects for a decline, but the COT reports currently suggest otherwise. Over the past three months, the number of long positions has increased from 102,000 to 142,000, while the number of short positions has decreased from 58,000 to 52,000. I believe that over time, professional players will start to offload long positions or increase short positions, as most factors supporting the pound's rise have already been priced in. However, it's important to remember that this is just an assumption. Chart analysis indicates a "bearish" trend at the moment, but it remains unstable.
Economic Calendar for the U.S. and U.K.
- U.K. – Bank of England Interest Rate Decision (11:00 UTC)
- U.K. – MPC Voting Results (11:00 UTC)
- U.K. – Bank of England's Accompanying Statement (11:00 UTC)
- U.S. – Initial Jobless Claims (12:30 UTC)
- U.S. – Philadelphia Fed Business Activity Index (12:30 UTC)
- U.S. – New Home Sales (12:30 UTC)
On Thursday, the economic calendar contains three significant events and three less important ones. The impact of the news background on market sentiment will be strong for the rest of the day.
GBP/USD Forecast and Trading Recommendations
Sales of the pair are possible today if the hourly chart closes below the 1.3151 level, targeting 1.3054. Or after a rebound from the 1.3259 level, targeting 1.3151. I wouldn't rush into buying, but short-term trades can be considered with a target of 1.3259 if there is a rebound from the 1.3151 level.
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.
