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On the hourly chart, the GBP/USD pair continued its decline on Wednesday, staying below the 161.8% corrective level at 1.3259. This morning, the pair dropped further to the 1.3151 level. A rebound from this level may lead to a recovery for the pound, causing a slight rise toward 1.3259. However, a consolidation below 1.3151 would indicate further decline towards the next Fibonacci level of 127.2% at 1.3054.
The current wave structure is clear. The last completed upward wave (September 26) failed to break the peak of the previous wave, while the current downward wave easily broke the low of the previous wave, which was at 1.3311. Thus, the bullish trend is now over, and a bearish trend has begun.
On Wednesday, bearish traders took a brief pause; by Thursday morning, they had resumed with renewed strength. Yesterday, the ADP report showed that 143,000 new jobs were created in September. Although this figure isn't particularly high, it exceeded market expectations, which is important as the market often reacts based on how the reports compare to forecasts. When expectations are lower, the currency tends to rise. Overall, the dollar has performed favorably this week. Today, the ISM services index for September will be released, typically an important indicator for the market. While the manufacturing sector has been facing challenges due to the hawkish stance of the FOMC, the services sector has not. As a result, the dollar could continue to rise today, though traders have already been pricing in the strength of the U.S. currency. Therefore, the decline during the U.S. session may be more modest or even stop. The key day of the week is Friday, when the labor market and unemployment reports could put pressure on the dollar, but the trend has already shifted to bearish.
On the 4-hour chart, the pair reversed in favor of the U.S. dollar and consolidated below the 76.4% correction level at 1.3314. This indicates that the downward movement could continue towards 1.3044. There are no new emerging divergences today, but several bearish signals have formed in recent weeks. A consolidation above 1.3314 would suggest the potential resumption of the bullish trend.
Commitments of Traders (COT) Report:
The sentiment among non-commercial traders became significantly more bullish last week. The number of long positions held by speculators increased by 30,503, while the number of short positions grew by 6,490. This means that after two weeks of reducing long positions and increasing short positions, the bulls have returned to their previous strategy. The bulls still hold a solid advantage, with a gap of 87,000 between long and short positions: 155,000 versus 68,000.
In my opinion, the pound still has the potential to fall, but the COT reports suggest otherwise for now. Over the past three months, the number of long positions has risen from 102,000 to 155,000, while short positions increased from 58,000 to 68,000. I believe that over time, institutional investors will either reduce their long positions or increase their short positions, as all potential reasons for buying the pound seem to have already been priced in. However, the chart analysis still indicates a bullish trend.
News Calendar for the U.S. and the U.K.:
U.K. – Services PMI (08:30 UTC)
U.S. – Initial Jobless Claims (12:30 UTC)
U.S. – Services PMI (13:45 UTC)
U.S. – ISM Non-Manufacturing PMI (14:00 UTC)
On Thursday, the economic calendar includes several important releases, with the ISM report being particularly notable for its potential market impact. The effect of the news on market sentiment throughout the rest of the day could be moderate.
GBP/USD Forecast and Trading Tips:
Selling opportunities were available on the hourly chart after a rebound from 1.3425 with targets at 1.3357 and 1.3259. Both targets have been met. A break below 1.3259 offered the chance for further sales with a target of 1.3151. A break below 1.3151 would open the door to 1.3054. Small buy opportunities might be considered on a rebound from 1.3151 on the hourly chart, but I would anticipate further declines in the pound with a target of 1.3054.
The Fibonacci levels are built from 1.2892 to 1.2298 on the hourly chart and from 1.4248 to 1.0404 on the 4-hour chart.
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