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On the hourly chart, the GBP/USD pair retraced on Thursday to the resistance zone of 1.2709–1.2734, below which it had previously consolidated. However, a rebound from this zone favored the US dollar, resuming its downward movement toward the support zone of 1.2611–1.2620. Consolidation below this zone could pave the way for further declines toward the Fibonacci 200.0% level at 1.2570.
The analysis of the wave structure remains clear, indicating that the last completed upward wave failed to break the previous high, while the most recent downward wave easily broke through two previous lows. This confirms the continuation of the bearish trend. To signal the end of this bearish trend, the pair would need to return to 1.3000 and close above the last peak, which seems unlikely in the near future.
On Thursday, the pound lacked significant news. While traders initially signaled intentions for an upward correction, Jerome Powell's evening remarks diminished their enthusiasm. The FOMC chair reaffirmed that the U.S. economy remains strong, inflation is decreasing, and the labor market is stable. Consequently, the dollar gained strength late in the day.
This morning, GBP bulls had placed their hopes on corrections, but UK GDP and industrial production reports dampened these expectations. GDP for Q3 rose by only 0.1%, compared to a preliminary estimate of 0.2%. Industrial production also fell by 0.5% month-over-month, against expectations of +0.1%. Both reports once again undermined bullish attempts, further reinforcing bearish sentiment.
From my perspective, the market has new reasons to sell the pound. Below the 1.2709–1.2734 resistance zone, I will consider only sell trades. Although bearish momentum appears to be waning slightly, bearish traders maintain control, focusing on the 1.2620 level as their next target, which could be reached today.
On the 4-hour chart, the pair has consolidated below the Fibonacci 61.8% level at 1.2728, supporting further declines toward 1.2620. A rebound from this level and subsequent growth appear unlikely. Consolidation below 1.2620 would increase the likelihood of further declines toward the next Fibonacci retracement level at 76.4% (1.2565). Currently, bullish divergences hold little significance for traders.
The sentiment among Non-commercial traders became less bullish during the last reporting week but remains generally optimistic. Long positions decreased by 11,899 contracts, while short positions increased by 9,373 positions. Bulls still maintain a solid lead, with 121,000 long positions compared to 76,000 short positions.
Despite this, the outlook for the pound remains bearish. COT data indicates a growing presence of bears, with long positions rising from 102,000 to 120,000 and shorts increasing from 55,000 to 76,000 over the past three months. I believe professional players will continue reducing long positions or increasing short positions, as most factors supporting GBP purchases have already been priced in. Technical analysis also supports continued bearish sentiment.
Thursday's economic calendar features three notable U.S. events, with Powell's speech being the most significant. The news flow could significantly influence trader sentiment this evening.
Sell opportunities were viable following a rebound from the 1.3044 level on the 4-hour chart, targeting 1.2931, which was reached twice. Subsequent targets at 1.2931, 1.2892, 1.2788–1.2801, and 1.2752 were also achieved. The next targets are 1.2611–1.2620 and 1.2570. Buying in a bearish trend is not advisable at this time.
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