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The wave structure is clear. The last completed upward wave failed to break the previous peak, while the last downward wave breached the prior low. This confirms the continuation of a bearish trend. To signal a potential end to the bearish trend, the pair would need to return to the 1.2710 level and close above the last peak.
On Wednesday, no significant developments occurred in the UK. In the U.S., the Federal Open Market Committee (FOMC) minutes were released, but they had little impact on market sentiment. It is unlikely that the late-day rise in the U.S. dollar was attributable to this event. The minutes provided no new insights, merely reaffirming that the Federal Reserve intends to lower interest rates gradually, likely by 0.25% at each upcoming meeting. So far, there are no indications that the Fed might pause rate cuts in December.
As a result, traders on both sides remain cautious: bulls gained no significant insights to justify more aggressive strategies, while bears found no reasons to consider retreating.
On the 4-hour chart, the pair returned to the 1.2620 level and closed above 1.2565, which allows for the possibility of further growth. However, on the hourly chart, bulls have encountered strong resistance. At this stage, it may be more prudent to focus on the hourly chart, where signs of a potential break in the bearish structure could be observed.
The sentiment among non-commercial traders became slightly more bullish during the last reporting week. Speculators reduced the number of long positions by 745 units, while short positions decreased by 11,711 units. Despite this, bulls maintain a significant advantage, with a gap of 56,000 positions: 120,000 longs versus 64,000 shorts.
In my opinion, the pound continues to face a high likelihood of decline. The COT reports reflect an increase in bearish momentum. Over the past three months, long positions have grown from 102,000 to 120,000, while short positions have increased from 55,000 to 64,000. I expect professional traders to gradually reduce long positions or expand short positions as most factors driving pound purchases have already played out. Graphical analysis also supports the likelihood of further declines in the pound.
Wednesday's economic calendar includes five U.S. reports, some of which are quite significant. These events could have a moderate impact on trader sentiment.
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