On the hourly chart, the GBP/USD pair continued its upward movement on Thursday, consolidating above the 161.8% corrective level at 1.3259. This suggests that the pound's rise could continue toward the next targets at 1.3357 and 1.3425. The bears failed twice to hold the pair below the nearest support level at 1.3151.
The wave pattern is clear for now. The last completed downward wave broke the low of the previous wave, while the last upward wave broke the peak of the previous one, located at 1.3234. Thus, the bearish trend ended before it could fully develop. At least for now, I don't see any signs of even a sideways movement that could act as a lifeline for the US dollar.
The Federal Reserve has taken all possible measures to encourage the dollar's decline, and the Bank of England added more reasons to buy the pair. The pound gained two major advantages this week. The results of the Bank of England and Federal Reserve meetings could be interpreted in various ways, considering that certain decisions by both regulators were already factored into the price. Traders, in a bullish trend, decided to use both advantages to buy, although in a different scenario, they might have used them for selling. It appears that the market once again used ambiguous information to follow the current trend.
The current news background is not particularly unfavorable for the dollar, considering how long it has been declining. The market can't keep selling the dollar forever based solely on the Fed's monetary policy. Easing has already begun in the U.S., but it has also started in the UK and the EU.
On the 4-hour chart, the pair rebounded from the 1.3044 level and rose to the 76.4% Fibonacci level at 1.3314. The CCI indicator has already formed two bearish divergences, and the RSI indicator has formed another one. The RSI signaled overbought conditions in August. Since then, the pound has experienced slight decline. A rebound from the 1.3314 level could signal a potential downward move, but this rebound still needs to occur— the pair has been trading around this level for two days now.
Commitments of Traders (COT) Report:
The sentiment of the "Non-commercial" category of traders became much less bullish over the last reporting week. The number of long positions held by speculators dropped by 18,701, while short positions fell by only 911. Bulls still have a solid advantage, with 142,000 long positions compared to 52,000 short positions—a 90,000 contract difference.
In my opinion, the pound still has room for a decline, but the COT reports tell a different story for now. Over the past three months, the number of long positions has risen from 102,000 to 142,000, while short positions have decreased from 58,000 to 52,000. I believe that over time, professional traders will start reducing their long positions or increasing their short positions, as all the factors supporting the pound's rise have already played out. However, this is just speculation. The chart analysis still indicates a bearish trend, though it remains unstable.
Economic Calendar for the US and the UK:
- UK – Retail Sales (06:00 UTC).
On Friday, the economic calendar contains only one event. The news background won't have much impact on market sentiment for the rest of the day.
GBP/USD Forecast and Trader Tips:
Selling the pair is possible today if it rebounded from the 1.3314 level on the 4-hour chart, with a target at 1.3044. I wouldn't rush into buying, but short-term trades could be considered with targets at 1.3357 and 1.3425, provided the pair closes above 1.3314 on the 4-hour chart.
Fibonacci levels are plotted between 1.2892–1.2298 on the hourly chart and between 1.4248–1.0404 on the 4-hour chart.
