The wave situation is straightforward. The new upward wave broke the previous wave's peak, while the last completed downward wave did not break the previous low. Thus, there is a possibility that the "bearish" trend is ending, and a "bullish" trend is beginning. However, I believe that any "bullish" trend could be weak. Still, last week, the bulls attacked confidently, largely ignoring the fundamental background.
On Wednesday, the fundamental background was relatively interesting, but it failed to trigger increased market activity. The U.S. inflation report showed an increase to 2.7%, while core inflation was 3.3%, in line with traders' expectations. It's essential to note that the market reacts not just to the data itself but to how well it aligns with expectations. If the actual and forecast values match, it means the event has already been priced in by traders. This is precisely what we saw yesterday. The report's impact wasn't enough to energize bulls or bears and push the pair out of the horizontal channel. Today, the situation is unlikely to change significantly. There's little news, and it's unlikely to strongly influence traders' sentiment. Therefore, I expect the pound to continue trading sideways today.
On the 4-hour chart, the pair returned to the 61.8% Fibonacci retracement level at 1.2728, consolidating above it. This could allow the upward movement to continue toward the next retracement level at 50.0% – 1.2861. However, on the hourly chart, the pound is stuck in a sideways channel, which currently takes precedence. If the pair consolidates below 1.2728, this could signal the resumption of the "bearish" trend, clearly visible on the 4-hour chart.
Commitments of Traders (COT) Report
The sentiment of non-commercial traders has become less "bullish" over the past week. The number of long positions held by speculators decreased by 403, while short positions increased by 1,905. Bulls still have the upper hand, but their advantage has been fading in recent months. The gap between long and short positions is now just 19,000: 98,000 longs vs. 79,000 shorts.
In my opinion, the pound remains under pressure, and the COT reports indicate that bears are strengthening their positions nearly every week. Over the past three months, the number of long positions has decreased from 160,000 to 98,000, while short positions have risen from 52,000 to 79,000. I believe professional players will continue to reduce their long positions or increase shorts over time, as all potential factors supporting the pound have already been priced in. Technical analysis also supports the pound's decline.
Economic Calendar for the U.S. and U.K.:
- U.S. Producer Price Index (13:30 UTC)
- U.S. Initial Jobless Claims (13:30 UTC)
Thursday's economic calendar includes two low-importance events, suggesting the impact of the fundamental background on trader sentiment may be weak today.
Forecast for GBP/USD and Trading Recommendations:
- Sell Positions: Possible after a rebound from the 1.2788–1.2801 zone on the hourly chart, targeting 1.2709–1.2734. Also, selling is possible if the pair closes below 1.2709–1.2734, targeting 1.2611–1.2620.
- Buy Positions: Risky to consider at this time, although there is no evidence yet of the current "bullish" trend ending.
Fibonacci levels are plotted at 1.3000–1.3432 on the hourly chart and 1.2299–1.3432 on the 4-hour chart.
