Hello, dear traders! On the hourly chart, the GBP/USD pair again rebounded from the 127.2% Fibonacci level at 1.3279 on Wednesday. Besides, it made a reversal in favor of the British pound and started to rise towards the correction level of 76.4% at 1.3425, which the pair failed to break three times earlier. However, this morning the pair performed a new reversal in favor of the US currency. Therefore, I believe that a new decline to 1.3279 is most likely. Overall, the British currency managed to avoid decline, unlike the European currency. However, the pound may also fall at least in the coming weeks. The news background in the UK was weak yesterday and did not affect traders' sentiment. Only Jerome Powell's speech was significant. Besides, it stimulated the pound's further growth. However, it is unlikely to be a long-term rise. Powell provided a respite to the market as almost all market participants expected the Fed to raise the interest rate immediately by 0.5% on March 15-16.
However, Powell mentioned only 0.25% hike and noted that more aggressive measures would be introduced if inflation continued to rise. Moreover, inflation will further grow. Currently, the global supply chains will be hit again due to Western sanctions against Russia, as well as the retaliatory sanctions. It is evident that Russia is a huge sales market. Therefore, Western companies will suffer heavy losses if they damage trade relations with Russia. It could cause problems with certain raw materials, oil, and gas. Moreover, oil has already surged to $113 a barrel and continues to rise. This means that almost all commodities and services which are produced from gasoline, oil, gas and various derivatives will grow, that is, inflation will remain high and continue to accelerate. Besides, the idea of raising the interest rate by 0.25% is not reasonable to stop the current rate of increase in consumer prices. Moreover, this issue concerns the UK, the EU, the US, and other states, to which the products of the mentioned above countries are supplied and where imported gasoline, oil and gas are used.
On the 4-hour chart, the pair performed a new rebound from the correction level of 61.8% at 1.3274. It provides evidence to expect a reversal in favor of the British currency and growth towards the 50.0% Fibonacci level of 1.3457. A rebound from 1.3457 will support the US currency and will cause a further decline towards 1.3274. Besides, the pair made three attempts to test this level. If it manages to close below it, a new fall of the British currency towards the correction level of 76.4% at 1.3044 is likely.
COT report:
The sentiment of the "non-commercial" traders changed sharply again in the last reporting week. The number of long contracts held by speculators decreased by 8309, while the number of short contracts increased by 346. Thus, the general sentiment of major players became more bearish. However, the number of long and short contracts are equal in almost all categories of traders. Thus, I conclude that the current sentiment is more neutral than bearish. Nevertheless, this fact is insignificant as geopolitical factors may continue to have a profound impact on traders' sentiment. Therefore, their sentiment can change dramatically.
US and UK economic news calendar:
UK - Services PMI index (09-30 UTC).
US - Initial and secondary jobless claims (13-30 UTC).
US - ISM services business activity index (15-00 UTC).
US - Federal Reserve Chairman Jerome Powell will give a speech (15-00 UTC).
On Thursday, the UK services business activity index was released. It fell slightly in February. The US reports will be more significant. However, they will likely cause no reaction from traders. Besides, Jerome Powell's speech may affect traders' sentiment.
GBP/USD outlook and recommendations for traders:
Currently, I would recommend selling the British pound in case a rebound from the levels of 1.3425 or 1.3457 with a target of 1.3274 is carried out. It is advisable to buy the pound if there is a rebound from 1.3279 on the hourly chart with targets 1.3357 and 1.3425. Now it is recommended to close them. It is possible to continue buying the pound if the pair closes above 1.3425.