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On the hourly chart, the GBP/USD pair made a new reversal in favor of the U.S. dollar on Wednesday and settled below the corrective level of 127.2% – 1.3054. Today, the pair has returned to this level. A rebound from it will allow traders to expect a further decline of the pound towards the level of 1.2931. If the quotes consolidate above 1.3054, a slight rise in the pair can be expected.
The wave situation raises no questions. The last completed wave down did not break the low of the previous wave, but the last upward wave also failed to break the peak of the previous wave, which is located at the level of 1.3264. Thus, we are currently dealing with a trend reversal downwards. The last, not yet completed, wave down has already broken the low of the previous wave, which also confirms the formation of a bearish trend.
The fundamental backdrop on Wednesday mostly favored a rise in the pair, but bears remained persistent. Traders realized that the time for the Fed's monetary policy easing had come, so there is no longer a need to react with a mass exodus from the U.S. dollar in response to each inflation drop. Furthermore, the bullish trend cannot last forever. A bearish trend is currently forming, which leaves little doubt. Therefore, it is important to look for opportunities to open short positions. The market has long been preparing for the first rate cuts in the U.S., and this event had been fully priced in weeks before the meeting. I believe that the pair's decline will continue. For the bulls to regain control, the bearish trend needs to be broken. Today's fundamental backdrop is weak, and I wouldn't expect the Producer Price Index (PPI) to have a significant impact on the pair's movement. Bears need to defend the 1.3054 level, and if they succeed, the decline might resume as soon as today.
On the 4-hour chart, the pair has returned to the level of 1.3044. A rebound from this level, along with bullish divergence on the CCI indicator, suggests some potential for the pair's growth, though I don't expect it to be strong. I am more inclined to see the pair consolidate below 1.3044, which would allow for further decline toward the next corrective level of 61.8% – 1.2745.
Commitments of Traders (COT):
The sentiment among the "Non-commercial" trader category became significantly more bullish during the last reporting week. The number of long positions held by speculators increased by 8,610, while the number of short positions decreased by 9,537. Bulls still hold a solid advantage. The gap between long and short positions is 108,000: 160,000 versus 52,000.
The British pound still has prospects for decline, although the COT reports suggest otherwise. Over the past three months, the number of long positions has risen from 102,000 to 160,000, while the number of short positions has fallen from 58,000 to 52,000. I believe that over time, professional players will begin to reduce their long positions or increase their short positions, as all the potential drivers for buying the British pound have already been priced in. However, it's important to note that this is just speculation. Technical analysis still points to a likely decline in the near future, though an unequivocal bullish trend remains for now.
News Calendar for the U.S. and UK:
On Thursday, the economic calendar includes two entries, neither of which are particularly important. The influence of the fundamental background on the market sentiment for the rest of the day will be weak.
GBP/USD Forecast and Trading Tips:
Sales of the pair were possible after a rebound from the 1.3258 level on the hourly chart, with a target of 1.3054. The target was achieved as expected. New sales are possible upon a close below the 1.3054 level, targeting 1.2931, and today, upon a rebound from the 1.3054 level from below. I would not rush to buy even if the pair closes above the 1.3054 level.
Fibonacci retracement levels are drawn from 1.2892 – 1.2298 on the hourly chart and from 1.4248 – 1.0404 on the 4-hour chart.
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