Hi, dear traders! On the 1-hour chart, GBP/USD declined to 1.1150 on Friday, but a rebound from this level enabled a new upward leg. So, the currency pair grew to 1.1306 on Monday which is the 423.6% Fibonacci correction. Besides, I'd like to turn your attention to the upward trend line that defined the current sentiment as bullish. If the pair settles below this level, it will reinforce the chance of a new drop.
Meanwhile, London is overwhelmed by political jitters. The government led by Liz Truss and the Bank of England managed to quell the panic in financial markets. The regulator has purchased government bonds worth 65 billion pounds. However, Liz Truss is still roasted for her unpopular fiscal plan at the beginning of her premiership. The situation with tax cuts or increases is extremely complicated. Earlier, the premier and her former Chancellor of Exchequer stated that some taxes would not be cut as initially planned. At the same time, well-informed sources unveiled information on an increase in the corporate tax from 19% to 25%. All in all, analysts are trying to puzzle out what exactly Liz Truss is going to do with taxes: increase, cut, or do both in parallel.
To be honest, Liz Truss had a disastrous start to her premiership. According to the insider information, a few weeks ago some MPs submitted letters of no confidence to Sir Graham Brady, chairman of the Committee. At least 50 per cent of Tory MPs must then vote "no confidence" in a ballot for a PM to lose. The campaign is now clicking into gear. The Guardian reported that a group of high-ranking officials are going to assemble and discuss the resignation of Liz Truss. The discussion is scheduled for tonight. Moreover, The Guardian pointed out that some Tories advocate for her immediate ousting. Some lawmakers insist that she has to step down voluntarily because of a failure of her economic agenda, in particular, the tax cut program. The periodical also reported that the rating of Liz Truss has been plumbing new depths since financial markets went through a meltdown and the pound sterling plummeted to historic lows.
On the 4-hour chart, GBP/USD closed above the downward trend channel. It is the second similar closure which cements the likelihood of GBP's growth towards at least 1.1496. Nevertheless, the information background could invite the bears back to the market. The technical picture of the 4-hour chart doesn't give a clear-cut answer to the outlook for GBP/USD.
Commitments of Traders report (COT):
The market sentiment of non-commercial traders turned less bearish than a week ago. The number of long contracts opened by speculators rose by 6,901 whereas the number of short contracts fell by 3,468. By and large, the overall sentiment of large market players remains bearish. Indeed, the number of short contracts still greatly outweighs the number of long contracts. Thus, large market players are poised to sell GBP, though their sentiment has been turning slightly more bullish in recent months, though the process is too slow. GBP could extend its growth only on condition of a strong information environment and appropriate market catalysts. There have been no such catalysts lately. Importantly, the trading sentiment of EUR speculators has been already bullish, but the single European currency is still undervalued against the US dollar. As for the sterling, even COT reports don't suggest any grounds to buy it.
Economic calendar for US and UK
The economic calendar for both the US and the UK is absolutely empty on Monday. So, the economic calendar will make no impact on trading sentiment for the rest of the day.
Outlook for GBP/USD and trading tips
I recommended selling the currency pair with the target at 1.1150 if it closes below 1.1306. The target was hit. I would advise you to plan new short positions on the condition the pair closes below the trend line on the 1-hour chart with the targets at 1.1000 and 1.0727. We could buy GBP at a bounce off the trend line on the 1-hour chart with the target at 1.1306.