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The wave situation is clear. The last completed upward wave (September 26) did not surpass the high of the previous wave, while the ongoing 27-day downward wave easily broke the low of the previous wave, which was at the 1.3311 level. Therefore, the bullish trend is considered over, and the formation of a bearish trend has begun. A corrective upward wave was expected from the 1.2931 level, but as I mentioned, graphical signals alone are insufficient. The bulls need to show a willingness to push forward, which is currently lacking.
On Friday, the U.S. released not only the Nonfarm Payrolls report, which turned out much weaker than forecasts but also the unemployment rate, which matched expectations. Wage growth figures also did not surprise traders. The ISM Manufacturing PMI was the only report that could negatively affect the U.S. dollar, as it fell from 47.2 to 46.5, whereas traders expected an increase to 47.6. It can be confidently stated that two out of the three most significant U.S. reports on Friday were disappointing. However, market reaction is telling. While the U.S. dollar declined on Friday, the drop was minimal. Today, it is already gaining ground. Therefore, I do not see the important U.S. reports having a substantial impact on bearish sentiment. The bears remain poised for action. This week, the U.S. presidential election and the Federal Reserve meeting could significantly influence the dollar's exchange rate and trigger heightened volatility.
The pair rebounded from the 1.3044 retracement level on the 4-hour chart, suggesting the potential for further decline towards the next 61.8% retracement level at 1.2745. The bullish divergence in the CCI indicator only allowed for a weak correction. A rebound from the 1.2745 level could favor the pound and lead to slight growth, though it may remain weak.
Commitments of Traders (COT) Report
The sentiment of the "Non-commercial" category of traders became less bullish over the last reporting week, but it remains bullish overall. The number of long positions held by speculators decreased by 7,967, while short positions increased by 253. The bulls still hold a significant advantage, with a gap of 66,000 positions: 132,000 long versus 66,000 short.
In my opinion, the pound still has potential for further decline, but the COT reports do not yet indicate a strong increase in bearish positions. Over the past three months, the number of long positions has risen from 102,000 to 132,000, while short positions have grown from 55,000 to 66,000. I believe that professional players will gradually reduce long positions or increase short positions (as seen with the euro), as all potential factors for buying the British pound have already been priced in. Graphical analysis suggests this process may begin soon (or has already started, judging by the waves).
News Calendar for the U.S. and the U.K.
Monday's economic calendar does not contain any notable events. The impact of the information background on market sentiment for the rest of the day will be absent.
Forecast for GBP/USD and Trading Tips
Selling the pair was possible after a bounce from the 1.3044 level on the 4-hour chart, targeting 1.2931. A close below the 1.2892–1.2931 zone will support continued selling towards 1.2788–1.2801. Buying the pound is possible from the 1.2788–1.2801 zone, targeting 1.2892–1.2931, but the bulls are currently very weak. Unpredictable movements are possible this week.
Fibonacci levels are plotted from 1.2892–1.2298 on the hourly chart and from 1.4248–1.0404 on the 4-hour chart.
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