On the hourly chart, GBP/USD rose to the 50.0% Fibonacci retracement level at 1.3404 on Thursday. A rebound from this level would favor the US dollar and a decline toward the 38.2% Fibonacci level at 1.3342. Consolidation above 1.3404 would increase the likelihood of further growth toward the 1.3454–1.3469 resistance level.
The market situation remains bullish. The latest completed downward wave failed to break below the previous low, while the new upward wave is close to breaking above the previous peak. Thus, the bulls continue to maintain control of the market. FOMC monetary policy tightening and the hawkish outlook communicated by Kevin Warsh supported the dollar for a month. Now, the bulls have taken the lead, as the Bank of England may begin its monetary policy tightening cycle next week.
The news background on Thursday offered no negative signals for the US dollar. However, factors that the market had largely ignored in recent months came into play. Despite the US GDP report for the third quarter exceeding forecasts and the core PCE index accelerating, traders continue to recognize that inflation is rising not only in the United States and that the Federal Reserve is not the only central bank taking a hawkish stance. There is a 99% probability that the Bank of England will begin tightening monetary policy next week.
Furthermore, the US economy is currently facing numerous problems. These include the stock market bubble, which many analysts predict will eventually burst; weakness in the labor market; rising government debt; the budget deficit; and annual interest payments on government debt amounting to trillions of dollars. The war with Iran is also having a negative impact on the economy. Geopolitical factors could support the dollar only in the short term. In practice, the currency of a country engaged in an active war rarely appreciates. It is believed that the pound's upward movement could continue in the near future.
On the 4-hour chart, GBP/USD rebounded from the 76.4% Fibonacci retracement level at 1.3277, reversed in favor of the pound, and rose toward the 50.0% retracement level at 1.3409. A rebound from this level would favor the US currency and a decline toward the 61.8% Fibonacci level at 1.3348. Consolidation above 1.3409 would increase the likelihood of further growth toward the next Fibonacci level at 38.2% – 1.3467. No emerging divergences are currently visible on any of the indicators.
Commitments of Traders (COT) Report:
The sentiment of the "Non-commercial" trader category became less bearish over the latest reporting week. The number of Long positions held by speculators increased by 10,043, while the number of Short positions decreased by 16,501. The gap between Long and Short positions currently stands at approximately 54,000 versus 134,000. The bears' advantage has declined again, although it has been increasing in recent weeks. Previously, the bears' dominance was unquestionable, but the situation is now less clear, as the news background has changed over the past few months.
There is still no confidence in a bearish trend for the pound. However, much will depend in the near future on Trump's trade policy, the monetary policies of the Federal Reserve and the Bank of England, as well as the duration, scale, and consequences of the war in the Middle East. In recent months, the market had adjusted its expectations toward peace, but negotiations between Iran and the United States failed before they had properly begun. The war between the two countries could resume in full force as early as November.
Economic Calendar for the United States and the United Kingdom:
On October 30, the economic calendar contains no significant events. Therefore, the economic news background is unlikely to influence market sentiment on Friday.
GBP/USD Forecast and Trading Recommendations:
Selling the pair is possible today following a rebound from the 1.3404 level on the hourly chart, with targets at 1.3342 and 1.3263.Buying opportunities arose after the hourly chart closed above 1.3342, with a target of 1.3404. This target has been reached. New buying opportunities will arise after the hourly chart closes above 1.3404, with a target of 1.3454–1.3469.
The Fibonacci retracement levels are plotted from 1.3674 to 1.3136 on the hourly chart and from 1.3158 to 1.3655 on the 4-hour chart.
