Hello, dear traders! On Thursday, the GBP/USD pair rose to the level of 1.2238 according to the 1-hour trading chart. If the price bounces off this level, the pair will most likely slide towards 1.2112, the 127.2% Fibonacci retracement, thus enabling the US dollar to gain value. If the price consolidates above the 1.2238 mark, the British pound will extend gains, heading towards the next level of 1.2342.
The last two working days of this week are the most interesting and significant ones for the pound sterling and the dollar. Yesterday, the US released data on inflation, which was just as important as the decisions made by the Fed. Today's macroeconomic calendar included statistics on Britain's economic output for November. However, the market showed muted reaction to the GDP report. As for US inflation, traders reacted by selling the dollar as signs of cooling infaltion stirred expectations that the Fed could slow down the pace of interest rate hikes in February by lifting them only by 25 percentage points. Philadelphia Fed President Patrick Harker expressed that intention yesterday. Today's report on UK GDP pleased bulls, but they clearly had no strength left to add long positions. The economy expanded by 0.1% from October, while traders expected it to contract by 0.2% on a monthly basis. Thus, long bets on the British pound would be quite appropriate today. However, data on industrial production turned out to be rather downbeat. The indicator decreased by 0.2% in November, in line with market expectations.
There are no more important releases in today's calendar. I doubt that the US consumer sentiment index could have a severe impact on market sentiment at the end of the week. At the same time, once the North American session opens, trading activiy may still increase.
On the 4-hour chart, the pair advanced to the 127.2% Fibonacci retracement - 1.2250. As a result, a bearish divergence was formed according to the MACD indicator. This means that the pair may turn down and start falling towards the 1.2008 mark. If the price closes above 1.2250, the pair will most likely continue its bullish run towards the next Fibo level of 100.0% - 1.2674.
Commitments of Traders (COT) report:
Over the past week , the mood of non-commercial traders has become more bearish than a week earlier. The number of long contracts increased by 3,040, while the number of short ones - by 12,454. The overall sentiment of major players remains bearish, with the number of short contracts still exceeding that of long contracts. Over the past few months, the situation has changed dramatically. Now the difference between the number of long and short contracts is not too high - about 20,000. A few months ago, the difference was threefold. Thus, the outlook for the British pound has improved a lot lately. Nevertheless, the pound sterling may resume its decline in the near future as the price has gone beyond the three-month ascending corridor on the 4-hour chart.
Economic calendar for US and UK:
UK - GDP
UK - industrial production
US - consumer sentiment index from the University of Michigan
Friday's reports regarding the UK have already been released, with muted reaction from traders. As for news from the US, the only report traders may take notice of today is the consumer sentiment index. The effect of fundamental factors on market sentment in the rest of the day is expected to be weak.
GBP/USD forecast and trading tips:
Short positions on the British pound can be considered if the price bounces off the level of 1.2238. The level of 1.2112 can be seen as a target. Earlier, I assumed that going long with a view to reaching 1.2238 would be relevant in case of a rebound from the 1.2112 mark on the 1-hour chart. This target has already been achieved. Additional long positions can be opened if the price closes above the level of 1.2238, counting on a rise to 1.2342.