On the hourly chart, the GBP/USD pair continued its slight upward movement on Tuesday after rebounding from the 1.2892–1.2931 support zone, heading toward the 127.2% Fibonacci level at 1.3054. However, today, for example, the bulls sharply retreated from the market, even though no reports were released in the UK in the morning. This, in my opinion, clearly indicates the weakness of the bulls, who, in the absence of economic data, seem inclined to sell the pound. The pair may soon return to the 1.2892–1.2931 zone.
The wave situation is straightforward. The last completed upward wave (September 26) did not break the peak of the previous wave, while the current downward wave, now in its 24th day, easily broke the low of the previous wave, which was at 1.3311. Therefore, the bullish trend is now considered complete, and a bearish trend has begun. From the 1.2931 level, an upward corrective wave can be expected, but technical signals alone won't suffice. Bulls need the motivation to push forward, which they currently lack.
On Tuesday, the U.S. JOLTS report on job openings for September provided minor support for bulls by coming in weaker than expected. However, this morning, positive news from the Eurozone supported the euro. Still, while the euro saw gains, the pound found no reason to follow suit and resumed its decline. In the afternoon, if U.S. GDP and ADP reports exceed forecasts, the pound's fall is likely to continue back to the 1.2892–1.2931 zone. This is a strong support area; however, with additional U.S. data releases scheduled for this week, the bears might break through it. Currently, I still see no desire from the bulls to attack. Everything seems to point toward the bears eventually securing a hold below this support zone, which would open new possibilities for them.
On the 4-hour chart, the pair has consolidated below the 1.3044 corrective level, allowing us to expect a further decline toward the next corrective level of 61.8% at 1.2745. However, a bullish divergence on the CCI indicator triggered a reversal in favor of the pound and initiated an upward movement toward 1.3044. A rebound from this level would favor the dollar and renew the downward trend toward the 61.8% corrective level at 1.2745.
Commitments of Traders (COT) Report:
The sentiment among "Non-commercial" traders became slightly less bullish in the last reporting week but remained bullish. The number of long positions held by speculators decreased by 11,320, while short positions increased by 94. Bulls still hold a strong advantage, with a 74,000-contract gap between longs and shorts: 140,000 vs. 66,000.
In my view, the pound still has room to fall, although COT reports suggest otherwise. Over the past three months, the number of long positions increased from 135,000 to 140,000, while short positions rose from 50,000 to 66,000. I believe that over time, professional traders will start offloading long positions or increasing shorts (as seen with the euro), as all potential factors favoring the pound have already played out. Technical analysis suggests that this process could commence soon, or may have already started, judging by wave patterns.
Economic Calendar for the U.S. and UK:
- U.S. – ADP Employment Change (12:15 UTC)
- U.S. – Q3 GDP Growth Rate (12:30 UTC)
On Wednesday, two significant events are scheduled. The impact of the economic calendar on market sentiment for the rest of the day is expected to be moderate.
GBP/USD Forecast and Trading Recommendations:
Selling the pair is possible on a rebound from the 1.3054 level on the hourly chart or from the 1.3044 level on the 4-hour chart, targeting 1.2931. Buying the pound was viable from the 1.2892–1.2931 zone, aiming for 1.3054, but bulls are currently very weak. It is advisable to set a stop-loss at breakeven for this trade.
Fibonacci levels are built on 1.2892–1.2298 on the hourly chart and on 1.4248–1.0404 on the 4-hour chart.
