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On the hourly chart, the GBP/USD pair continued upward on Wednesday after the sixth consecutive rebound from the support zone of 1.2690–1.2705. In the second half of the day, under the influence of the news background, it consolidated above the resistance zone of 1.2788–1.2801. This was followed by a decline, influenced by the same news background, closing below the 1.2788–1.2801 zone. Today, a decline in the pound towards the 1.2690–1.2705 zone is more likely, but trading may be nervous and impulsive.
The wave situation hasn't changed yet. The last downward wave did not break the low from May 30. The new upward wave managed to break the wave's peak on June 4. Thus, the trend for the GBP/USD pair remains bullish, with the bulls having a significant advantage. However, in recent weeks, we have observed nearly horizontal movement – the peaks and lows of the waves either do not break previous extremes or break them very weakly. Under the current circumstances, I believe it is better to focus on two zones: 1.2690–1.2705 and 1.2788–1.2801, and trade from them.
The news background on Wednesday allowed both bulls and bears to act. Inflation in the US slowed more than the market expected, which allowed for dollar selling. The results of the FOMC meeting can confidently be called "hawkish," which already allowed for dollar buying. It turned out that Jerome Powell does not expect any easing of monetary policy in the coming months, and the entire FOMC now expects a rate reduction of no more than 0.37% (median value) by the end of the year. Thus, according to updated Fed forecasts, the rate may be cut 1-2 times in 2024 by 0.25% each. Previous forecasts indicated three reductions of 0.25% each. I believe this information was a substantial reason to buy the dollar. But for unexplained reasons, dollar purchases were much weaker yesterday than sales after the inflation report, which, as it turned out in the evening, did not influence the Fed's outlook.
On the 4-hour chart, the pair made a new reversal in favor of the pound and resumed its upward movement. Since there has been no closing below the ascending trend line yet, the pound may continue to rise towards the level of 1.3044. The pound has long exhausted its growth potential, but the bulls are still ready to attack even on such a news background that largely supports the bears. I will expect the pound to fall after closing below the trend line.
The sentiment of the "Non-commercial" category of traders became more bullish over the last reporting week. The number of Long contracts held by speculators increased by 9,077, and the number of Short contracts decreased by 8,731. The overall sentiment of large players has changed again, and now the bulls have a solid advantage. The gap between the number of Long and Short contracts is 43,000: 102,000 versus 59,000.
The pound still has good prospects for a decline, but the bears are still not ready to advance. Over the past 3 months, the number of Long contracts has not changed, while the number of Short contracts has increased from 44,000 to 59,000. I believe that over time the bulls will continue to get rid of Buy positions or increase Sell positions, as all possible factors for buying the British pound have already been worked out. However, the key factor will be the willingness and ability of the bears, not the news background or COT report data.
USA – Producer Price Index (12:30 UTC).
USA – Initial Jobless Claims (12:30 UTC).
On Thursday, the economic event calendar contains only two entries, neither of which is significant. The influence of the news background on market sentiment for the remainder of the day will be weak or absent.
Selling the pound is possible if it closes below the 1.2788–1.2801 zone with a target of 1.2690–1.2705. Buying could have been done on a rebound from the 1.2690–1.2705 zone with a target of 1.2788–1.2801. This zone has been reached. New buys can be considered if it closes above 1.2788–1.2801 with a target of 1.2892.
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