Hi, dear traders! According to the H1 chart, GBP/USD reversed upwards on Tuesday and began to rise towards the retracement level of 323.6% (1.1883). However, it reversed course several hours later and resumed its fall. It is currently moving down towards 1.1684. Yesterday, traders reacted strongly to weaker than expected PMI data, pushing the US dollar down. The US economy is already in a recession or about to enter it in the near future, making the upcoming speech by Jerome Powell on Friday particularly important.
The Fed chairman could give key remarks on the current state of the US economy and make a considerable impact on the sentiment of traders. Earlier, Powell repeatedly said that a recession was unlikely. These statements are increasingly called into doubt with each passing day. A recession is now commonly defined as a fall in GDP, regardless of what the Fed says. Powell is expected to comment on the Fed's future monetary policy and the latest economic data. If traders feel that the regulator's chairman has changed his mind on these topics, it could weaken the position of GBP/USD bears. On the other hand, Powell could confirm that the Federal Reserve is ready to keep increasing the interest rate and do everything to bring inflation back to 2%, despite the weak data releases published recently. This situation would give support to the US dollar.
According to the H4 chart, the pair fell to the retracement level of 161.8% (1.1709) and bounced upwards towards 1.2008. If GBP/USD settles below 1.1709, it would make a downward trend more likely. Indicators show no signs of emerging divergences today.
Commitments of Traders (COT) report:
Non-commercial traders became slightly less bearish in the last week covered by the report. Traders opened 1,865 Long and 506 Short positions. Market players remain bearish on GBP/USD, and Short positions continue to outnumber Long ones greatly. However, more traders are now net long on GBP/USD than before. Major players remain bearish on the pound, and it will take a lot of time for them to become predominantly bullish. Over the past several weeks, the pound sterling's upward movement has been limited, and the COT reports suggests that GBP is more likely to continue its decline than begin a new long-term uptrend.
US and UK economic calendar:
US - Durable Goods Orders (12-30 UTC).
The sole data release in the US could have a slight impact on traders today. There are no events in the UK.
Outlook for GBP/USD:
Earlier, traders were recommended to open short positions if the pair settled below 1.2208 on the H1 chart, with 1.1709 being the target. GBP/USD reached this level yesterday. New short positions can be opened if the pair settles below 1,1709, targeting 1.1496. Long positions can be opened if the pair settles above the descending trend channel on the H1 chart, with 1.2238 being the target.