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On the hourly chart, the GBP/USD pair rebounded from the 200.0% corrective level at 1.2569 on Thursday, showed a slight rise, and then resumed its decline. By Friday morning, the 1.2488 level had been tested. A bounce from this level will favor the pound and a potential rise toward the 1.2569 level. If the pair consolidates below 1.2488, the likelihood of further declines toward the support zone of 1.2363–1.2370 will increase.
The wave situation is clear. The last completed upward wave did not break the peak of the previous wave, while the last downward wave broke the previous low. Thus, the "bullish" trend can be considered over for now.
On Thursday, the pound's decline continued after traders reviewed the results of the Bank of England meeting. The decision to keep the interest rate unchanged was expected, but three members of the Monetary Policy Committee (MPC) voted for a rate cut. Market expectations were for only one MPC member to support easing monetary policy in December. This implies that a rate cut could have occurred this month, which is a more "dovish" stance than traders had anticipated.
Additionally, the Bank of England warned that economic growth might slow in the coming months while inflation could accelerate. The latter could have supported bullish traders, as it might lead to a more "hawkish" approach from the Bank of England in the future. However, traders focused on the three MPC members voting for a rate cut. In my view, the pound's decline will likely continue due to the weak state of the British economy and the MPC's more dovish stance. Although the fall may not be sharp, it is worth noting that the Federal Reserve took a more "hawkish" stance than expected on Wednesday. Thus, bears currently have a significant advantage.
On the 4-hour chart, the pair made a new reversal in favor of the U.S. dollar and consolidated below the 76.4% corrective level at 1.2565. This suggests that the decline may continue toward the 1.2432 level. No emerging divergences are observed on any indicators today.
The sentiment among "Non-commercial" traders has barely changed over the past reporting week. The number of long positions held by speculators increased by 4,707, while short positions decreased by 3,092. Bulls still have the advantage, but it has been fading over the past few months. The gap between the number of long and short positions has now narrowed to just 27,000: 102,000 versus 75,000.
In my opinion, the pound remains under pressure to decline, and COT reports signal that bearish positions have been strengthening almost weekly. Over the past three months, the number of long positions has dropped from 160,000 to 102,000, while short positions have risen from 52,000 to 75,000. I believe professional traders will continue to reduce their long positions or increase their short positions over time, as most factors driving purchases of the British pound have already played out. Technical analysis also supports a bearish outlook for the pound.
Friday's economic events calendar contains four entries, none of which stand out as particularly pivotal. The impact of the information background on trader sentiment throughout the remainder of the day may be minimal.
Selling the pair was possible on the hourly chart after a rebound from the 1.2709–1.2734 zone, with targets at 1.2611–1.2620. These targets have been achieved. Purchases can be considered if the pair rebounds from the 1.2488 level on the hourly chart, but it is important to note that the trend has shifted to "bearish."
Fibonacci levels are plotted based on 1.3000–1.3432 on the hourly chart and 1.2299–1.3432 on the 4-hour chart.
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