On the hourly chart, the GBP/USD pair reversed in favor of the British on Tuesday, rising to 1.2623. A rebound of the pair's exchange rate from this level will benefit the American currency and result in a slight decline toward 1.2546. If the quotes stabilize above 1.2623, it will increase the chances of further growth toward the next Fibonacci level of 0.0% (1.2676). Currently, the chances of closing above 1.2623 are higher than a rebound.
The British pound unexpectedly found new grounds for continuing its growth. The unemployment rate in the UK decreased, and the number of jobless claims also decreased. Traders expected opposite values, but the economic data surprised and pleased the bulls. This morning, quite decent data also came out from the UK. The GDP level in May increased by 0.2% m/m, which was in line with traders' expectations. Industrial production volumes declined by 0.3% in April. Still, weak production does not surprise anyone now - business activity indices are below 50.0 in many countries worldwide, including the USA, EU, and UK. Thus, today's reports can be considered quite positive because any GDP growth now indicates possible new tightening measures by the Bank of England's Monetary Policy Committee. And that is good for the British pound.
In the evening, we have a press conference with Jerome Powell and the announcement of the FOMC interest rate decision. Unfortunately, it is extremely difficult to expect hawkish decisions and statements. Inflation in the USA is decreasing quite rapidly, and the Federal Reserve's interest rate has almost reached its peak. There are currently no reasons to tighten monetary policy based on the results of June or the promise of tightening in July. Thus, the British pound unexpectedly finds new grounds for continued growth. The producer price index can also support the bulls, as it is unlikely to show acceleration after the inflation report.
On the 4-hour chart, the pair has consolidated above the triangle, which allows us to expect further growth toward the Fibonacci level of 100.0% (1.2674). A bearish divergence in the MACD indicator occurred, and the pair experienced a slight decline afterward. However, a bullish divergence formed the next day, bringing the pair back to growth.
Commitments of Traders (COT) report:
The sentiment of the "non-commercial" trader category became slightly less bullish over the last reporting week. The number of long contracts held by speculators decreased by 5,257 units, and the number of short contracts decreased by 4,506. The overall sentiment of major players remains predominantly bullish, but the number of long and short contracts is now almost equal - 65,000 and 52,000, respectively. The pound has good prospects for further growth, and the current information background supports it more than the dollar. However, I do not expect a significant rise in the British pound in the coming months. The results of next week's Bank of England meeting will help clarify the pound's prospects.
News calendar for the USA and the UK:
UK - GDP for May (06:00 UTC).
UK - Industrial Production (06:00 UTC).
UK - Trade Balance (06:00 UTC).
USA - Producer Price Index (PPI) (12:30 UTC).
USA - Federal Reserve Interest Rate Decision (18:00 UTC).
USA - FOMC Economic Projections (18:00 UTC).
USA - FOMC Statement (18:00 UTC).
USA - FOMC Press Conference (18:30 UTC).
Wednesday's economic calendar includes many important events, but all reports from the UK are already known to traders. Only the late-evening Federal Reserve meeting and the PPI remain. The influence of the information background on traders' sentiment today can be significant.
Forecast for GBP/USD and trader advice:
Short positions on the British pound can be opened in case of a rebound on the hourly chart from the level of 1.2623, with targets at 1.2546 and 1.2470. Buying the British pound was possible upon closing above the level of 1.2546, with a target of 1.2623. This target has been reached. New purchases can be considered upon closing above 1.2623, with a target of 1.2676.