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The wave structure is clear and unambiguous. The last completed upward wave failed to surpass the peak of the previous wave, while the last downward wave broke below the previous low. Thus, the bullish trend can be considered finished, and a new bearish trend is forming. For this trend to conclude, the pound would need to rise at least to the 1.2709–1.2734 zone.
On Tuesday and Wednesday, the economic calendar was empty, providing neither bears nor bulls with strong reasons to open new positions. As a result, the pair is mostly stagnant, and this trend could persist until the end of the year. The pound may still decline today or tomorrow to the 1.2488 level, given the short distance to this mark. However, closing below this level would require significant effort from the bears, likely requiring new economic data, which is currently lacking. While the bearish trend remains, it may pause until next year.
On the 4-hour chart, the pair reversed in favor of the dollar and consolidated below the 76.4% retracement level at 1.2565. This indicates the possibility of continued declines toward 1.2432. The downward trend channel highlights the bears' dominance, which they are unlikely to relinquish anytime soon. Only a close above the channel would suggest a significant rise for the pound.
The sentiment of the Non-commercial trader category showed little change over the last reporting week. The number of long positions held by speculators increased by 4,707, while short positions decreased by 3,092. Bulls still hold an advantage, but it has been steadily declining in recent months. The gap between long and short positions has narrowed to just 27,000: 102,000 long versus 75,000 short.
In my opinion, the pound still faces downside potential, as the COT reports indicate a weekly strengthening of bearish positions. Over the past three months, the number of long positions has fallen from 160,000 to 102,000, while short positions have risen from 52,000 to 75,000. I believe professional traders will continue reducing long positions or increasing shorts, as all possible bullish factors for the pound have already been priced in. Graphical analysis also supports further declines for the pound.
Thursday's economic calendar does not include any notable events. The information background is unlikely to impact market sentiment today.
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