Hi, dear traders! According to the H1 chart, GBP/USD reversed upwards following the release of UK inflation data. However, the pound sterling's upwards movement has been very weak, and it failed to reach 1.1684. The pound's promising uptrend, which continued for the past several days, was cut short by the release of US CPI data. Bearish traders have sent the pair downwards, and they will likely continue to put pressure on GBP in the future. Early on Thursday, GBP/USD went down once more, and it could continue to decline towards the retracement level of 423.6% (1.1306). There are hardly any events left on the economic calendar that could rectify the current situation. The pound sterling urgently needs support from favorable macroeconomic data to reverse course, but it is unclear what could push GBP up.
Today, industrial production and retail sales data will be released in the US. However, traders generally ignore these key reports. If the data turns out to be negative, it could give some support to the pound, but its upside movement is unlikely to be significant. In the UK, retail sales data will be released on Friday, but it will be overshadowed by EU CPI data. Market players are now focused on policy meetings by the Bank of England and the Federal Reserve. Both regulators are set to increase interest rates, but the size of these hikes is under question. These policy decisions will affect the pound sterling's future performance. The UK regulator would have to increase the interest rate by more than 0.50% to give support to the pound sterling. Alternatively, it could find support in the Fed hiking the rate by less than 0.75%, which would send the US dollar downwards. However, the most likely turn of events is a 0.50% move in the UK and a 0.75% move in the US, which would send GBP/USD tumbling once again.
According to the H4 chart, the pair bounced off 1.1496 and increased slightly. At the moment of writing, GBP/USD resumed its decline. If the pair closes below 1.1496, it could fall further towards the next retracement level of 200.0% (1.1111). The pair has exited the downward trading channel, but it is still close to dropping. The boundaries of the trend channel could possibly change in the future, particularly if GBP/USD closes below 1.1496.
Commitments of Traders (COT) report:
Non-commercial traders became significantly more bearish in the last week covered by the report. Traders closed 5,746 Long and opened 15,516 Short positions. Market players remain bearish on GBP/USD, and Short positions continue to outnumber Long ones greatly. The latest COT report indicates that GBP is unlikely to rise further. Major players remain bearish on the pound, and it will take a lot of time for them to become predominantly bullish. GBP's upward move by 200-300 points can be easily reversed in 2-3 days.
US and UK economic calendar:
US - Retail sales data (12-30 UTC).
US - Initial jobless claims data (12-30 UTC).
US - Industrial production data (12-30 UTC).
There are no events in the UK on Thursday, and the few data releases in the US could have a limited impact on traders.
Outlook for GBP/USD:
Traders were previously recommended to open new short positions if GBP/USD bounced off 1.1709 on the H4 chart with 1.1496 as the target. The pair has reached this target. New short positions can be opened if the pair closes below 1.1496, with 1.1306 being the target. Going long on GBP/USD is not recommended at this point.