Hi, dear traders!
According to the H1 chart, on Wednesday GBP/USD bounced off the retracement level of 61.8% (1.3599) down towards the level of 50% (1.3552), before reversing upwards and closing below 1.3599. The pair could continue to rise towards the next Fibo level of 76.4% (1.3655). Yesterday, January's FOMC meeting minutes were published. Market expectations of multiple rate increases have risen significantly recently. Now, market players see 7 rate hikes this year, prompted by soaring inflation that continues to skyrocket despite the winding down of QE. The latest Fed meeting made no important policy decisions and gave no signals about the regulator's future plans.
Now, the Fed should clarify how much they would hike the interest rate in March and how often they would do it. However, the US central bank gave no information about it after the meeting, or in its minutes. FOMC members acknowledged US economic growth, while at the same time expressing concern over inflation and stating they were ready to tackle the issue. At the same time, many market players assume high inflation is a complex problem, which is present in many nations and which hinges on the deficit of oil and natural gas, as well as the supply chain situation. Several rate increases could only slow down price growth, and not return it to the target level.
According to the H4 chart, the pair settled above the descending trend line and continued to rise towards the retracement level of 38.2% (1.3642), as predicted earlier. If GBP/USD bounces off this level, it could then decline towards the Fibo level of 50% (1.3457). If the pair settles above the Fibo level of 38.2%, it could then rise towards the next level of 23.6% (1.3870). There are no emerging divergences today.
Commitments of Traders (COT) report:
The sentiment of Non-commercial traders has changed drastically over the past week covered by the report. Previously, they opened Short positions, now they have opened 15,127 Long positions. The overall trend remains bearish, as open Short positions still outnumber Long ones. However, it shows how quickly the mood of traders can shift. This week's events could contribute to this.
US and UK economic calendar:
US – Initial jobless claims data (13-30 UTC).
There are no important events in the UK, and the sole data release in the US cannot significantly influence traders.
Outlook for GBP/USD
At this point, opening short positions could be recommended, but there are no sell signals at either the H1 or the H4 charts. It is unlikely that any sell signals could be found at the H1 chart. If the pair closes above the trend line, long positions could be opened with 1.3642 being the target.