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On the hourly chart, the GBP/USD pair on Thursday reversed at the support zone of 1.2892 – 1.2931, which enabled it to initiate a rise towards the 127.2% corrective level at 1.3054. The rise is very weak. Over a day and a half, the pound has gained only 90 points. However, the news background is not in its favor, and the bears are not ready to completely leave the market. A pause in the pound's decline is likely in the near future.
The wave situation raises no questions. The last completed upward wave (September 26) did not break the high of the previous wave, while the downward wave, forming for 21 days, easily broke through the low of the previous wave, which was at the 1.3311 level. Thus, the "bullish" trend is considered complete, and the formation of a "bearish" trend has begun. A corrective upward wave can be expected from the 1.2931 level, but graphical signals must be formed.
Yesterday, the reports from the UK provided very little support for the bulls. In fact, they provided no support at all. As a result, the euro and the pound rose yesterday and today, despite the unfavorable news background. The UK Manufacturing PMI in October was just 50.3 points, below market expectations. The Services PMI in October was 51.8 points, also below forecasts. U.S. activity indices were better than traders expected, and new home sales in the U.S. also increased. Therefore, the pound's rise yesterday should not have occurred at all. The same goes for today, as the U.S. durable goods orders report exceeded expectations, despite being negative. Now we just have to wait for the University of Michigan consumer sentiment index, which will be released within the next hour. But as I mentioned earlier, the pound is currently rising simply because traders are adjusting it—bears are taking profits, while the bulls lack strong incentives to take action.
On the 4-hour chart, the pair secured itself below the 1.3044 corrective level, which suggests further declines toward the next corrective level of 61.8% at 1.2745. However, a "bullish" divergence in the CCI indicator enabled the pound to reverse and start rising towards the 1.3044 level. A rebound from this level will favor the U.S. dollar and a resumption of the decline towards the 61.8% corrective level at 1.2745.
Commitments of Traders (COT) Report:
The sentiment of the "Non-commercial" trader category did not change during the last reporting week and remains "strongly bullish." The number of long positions held by speculators decreased by 5,743, while the number of short positions increased by 1,590. The bulls still have a solid advantage. The gap between long and short positions is 86,000: 152,000 versus 66,000.
In my opinion, the pound still has room for decline, but the COT reports currently indicate otherwise. Over the past three months, long contracts have increased from 135,000 to 152,000, while short positions have risen from 50,000 to 66,000. I believe that, over time, institutional traders may start reducing their long positions or increasing their short positions, as all the potential buying factors for the British pound have already been priced in. Graphical analysis indicates that this process may begin soon (or has already begun, based on the wave structure).
News Calendar for the US and the UK:
On Friday, the economic calendar includes two events, one of which has already been released and did not support the bulls. The influence of the information background on market sentiment for the rest of the day is expected to be minimal.
GBP/USD Forecast and Trading Tips:
Sales of the pair are possible after a rebound on the hourly chart from the 1.3054 level or on the 4-hour chart from the 1.3044 level with a target of 1.2931. The pound could have been bought from the 1.2892 – 1.2931 zone with a target of 1.3054.
Fibonacci levels are plotted 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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