On the hourly chart, GBP/USD reversed in favor of the U.S. dollar on Friday and consolidated below the 50.0% retracement level at 1.3404. Today, the pair's quotes returned to this level. A rebound from it would favor the U.S. dollar and a potential decline toward the 38.2% retracement 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 the previous low, while the new upward wave broke the previous high. Thus, bulls continue to hold the initiative. The FOMC's monetary policy tightening and the hawkish outlook communicated by Kevin Warsh supported the dollar for a month. Bulls have now taken center stage, as the Bank of England may begin its monetary policy tightening cycle this week.
There was no significant news affecting the British pound or the U.S. dollar on Friday, but this week will be full of important developments. The results of the U.S. congressional elections will be announced tomorrow, the Bank of England will hold its meeting on Thursday, and the important U.S. Nonfarm Payrolls and unemployment reports will be released on Friday. These are only the most significant events scheduled for this week, excluding other economic reports and geopolitical developments. Therefore, the current week could be particularly active and eventful.
In the current situation, bulls appear to have everything they need to continue their advance. However, confidence in further pound appreciation ahead of the U.S. elections, for example, would be premature. A major political event could trigger volatile and unpredictable market movements. Investors may reassess the economic outlook for the U.S. economy, potentially causing significant movements in both stock and currency markets. At present, traders are expecting a Democratic victory and monetary policy tightening by the Bank of England. In my view, these expectations are well-founded, while the morning trading session indicates that bulls are optimistic.
On the 4-hour chart, GBP/USD rebounded from the 76.4% retracement level at 1.3277, reversed in favor of the British pound, and rose toward the 50.0% retracement level at 1.3409. A rebound from this level would favor the U.S. currency and a potential 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 slightly less bearish over the latest reporting week. The number of Long positions held by speculators increased by 2,417, while the number of Short positions rose by 1,411. The gap between Long and Short positions currently stands at approximately 57,000 versus 136,000. Bears maintain a substantial advantage, which has continued to widen over time. Previously, bearish dominance was unquestionable, but the situation has become less clear as the fundamental backdrop has changed in recent months.
Confidence in a bearish trend for the British pound remains low. However, in the near future, everything will depend 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 shifted its expectations toward peace, but negotiations between Iran and the United States collapsed before they had properly begun. As early as November, the war between the two countries could resume in full force.
Economic Calendar for the United States and the United Kingdom:
- United Kingdom – Manufacturing Purchasing Managers' Index (09:30 UTC).
- United States – ISM Manufacturing Purchasing Managers' Index (15:00 UTC).
The economic calendar for November 2 contains two noteworthy events. Economic data is expected to influence market sentiment during the second half of Monday's trading session.
GBP/USD Forecast and Trading Recommendations:
Short positions may be considered today following a rebound from 1.3404 on the hourly chart, with targets at 1.3342 and 1.3263. Long positions were available following an hourly close above 1.3342, with a target at 1.3404. This target has been reached. New long positions may be considered following an hourly close above 1.3404, with a target range of 1.3454–1.3469.
The Fibonacci grids are drawn from 1.3674 to 1.3136 on the hourly chart and from 1.3158 to 1.3655 on the 4-hour chart.
