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On the hourly chart, the GBP/USD pair continued its upward trend on Tuesday, reaching the 1.3425 level, from which it rebounded. This rebound favored the U.S. dollar, and the decline may now extend toward the levels of 1.3357 and 1.3259. A close above the 1.3425 level would indicate the pound's potential growth toward the 200.0% corrective level at 1.3485.
The wave pattern also raises no questions. The last completed downward wave, from September 6 to 11, breached the low of the previous wave, while the current upward wave surpassed the peak of the previous wave at 1.3234. Thus, the bearish trend ended almost before it began. Currently, I see no signs of a sideways trend that could stabilize the U.S. dollar. To disrupt the current bullish trend, a 400-point decline is required.
On Tuesday, there was no significant news to influence the markets, and bullish traders continued their advances unchallenged. They encountered resistance only around the 1.3425 level, from which a minor decline in the pair can be expected. At this point, I would not anticipate a steep fall without supportive news for the dollar. Even on days without negative news, the dollar continues to weaken. Next week, the U.S. currency faces new challenges with a series of important reports on business activity, job vacancies, labor market data, and unemployment, which have recently convinced traders of the need to continue selling the U.S. dollar. The dollar cannot continuously weaken; it will eventually recover. However, to anticipate such a movement, graphical signals, a trend reversal, and strong supportive news for the dollar are necessary. Currently, none of these are present. Therefore, the current decline in the pair may end around the 1.3357 level.
On the 4-hour chart, the pair rebounded from the 1.3044 level and rose to the 76.4% Fibonacci level at 1.3314, closing above it. The CCI indicator has already formed two bearish divergences, and there is another on the RSI indicator. The pound is overbought, as indicated by the RSI since August. Since then, the pound has hardly fallen. A close above the 1.3314 level would indicate potential for further growth up to 1.3642, rather than signaling the start of a decline.
Commitments of Traders (COT) Report:
The sentiment among the "Non-commercial" category of traders became much less bullish in the latest reporting week. The number of long positions held by speculators decreased by 17,250, while the number of short positions increased by 10,059. Thus, for the second consecutive week, professional traders are reducing long positions and increasing short positions. Despite this, the pound hardly fell during this time. Therefore, a decline seems very likely. The bulls still have a strong advantage, with a gap between long and short positions of 63,000: 125,000 against 62,000.
In my opinion, the pound still has room to fall, but the COT reports are currently suggesting otherwise. Over the past three months, the number of long positions has increased from 102,000 to 125,000, while the number of short positions has risen from 58,000 to 62,000. I believe that, over time, professional traders will start reducing long positions or increasing short positions since all possible factors favoring the purchase of the British pound have already been exhausted. However, for now, graphical analysis still indicates a bullish trend.
Economic Calendar for the US and the UK:
US – New Home Sales (14:00 UTC).
On Wednesday, the economic calendar contains only one minor event. The influence of the information backdrop on market sentiment for the remainder of the day will be absent.
Forecast for GBP/USD and Trader Recommendations:
Sales of the pair were possible following a rebound from the 1.3425 level on the hourly chart, with targets at 1.3357 and 1.3259. New buying opportunities can be considered if the pair closes above the 1.3425 level on the hourly chart, with a target of 1.3485, or in case of a rebound from the 1.3357 and 1.3259 levels.
The Fibonacci levels are constructed 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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