Hi everyone! On the hourly chart, the GBP/USD pair climbed on Monday and returned to 1.2447, the Fibo level of 100.0%. After a rollback, the pair dropped to 1.2342. The consolidation of the pair above 1.2447 could indicate the resumption of the upward movement. The price may climb to 1.2546. The pair halted its growth near this level once.
Yesterday, the UK revealed Services and Manufacturing PMI Indices. Today, it released the Construction PMI Index. There was no more news. However, the pound sterling strongly reacted to the same reports from the US. Hence, the pound sterling ended the day near 1.2447. Otherwise, the pair would have already slid to 1.2342. The UK Services PMI decreased to 55.2 from 55.9 and the Composite PMI Index dipped to 54.0 from 54.9. The British pound fell in the morning amid these macro stats. The Construction PMI Index rose to 51.6 from 51.1. However, this data did not affect the trajectory of the pair. I believe that the downward movement may continue today.
The economic calendar on Tuesday is empty. Thus, the pair is unlikely to drop significantly. If the opposite happens, it will indicate that the bears are in control. In any case, there is a good sell signal after a retreat from 1.2447. The pair has rolled back from this level for the fourth time in the last two weeks. This is a strong resistance level. Yesterday and today the pair has been unable to break through this level.
On the 4-hour chart, the pair dipped after the formation of a bearish divergence at the CCI indicator. However, yesterday, there was a bullish divergence at the CCI indicator as well, which helped the pair return to 1.2441. A retreat from this level will trigger a decline to 1.2250, the correction level of 127.2%. On the hourly chart, the retreat has already occurred.
Commitments of Traders (COT):
The mood of the "Non-commercial" category of traders has become a little more bullish over the last reporting week. The number of Long positions increased by 1,117 and the number of Short ones declined by 529. The overall mood of large traders remains bullish. For a long time, it has been bearish. The number of Long and Short contracts is now almost equal – 70,000 and 57,000 respectively. In my opinion, the pound sterling has good prospects for resuming growth but the fundamental background is not favorable either for the US dollar or the pound sterling. The latter has been growing for a long time. The net position of non-commercial traders has been rising for a long time. Everything depends on whether the British currency will be able to climb on the same drivers. I believe that at this time we should not expect the resumption of an upward movement.
Economic calendar for US and UK:
UK– Construction PMI Index (08:30 UTC).
On Tuesday, the economic calendar includes only one economic report – the Construction PMI Index. The impact of fundamental background on the movements of the pair in the afternoon will be low.
Outlook for GBP/USD and trading recommendations:
It is better to open short positions after a retreat from 1.2447 on the hourly chart with target levels of 1.2342 and 1.2295. It is recommended to go long after a rebound from the levels of 1.2342 or 1.2295 with a target of 1.2447.