Good day, dear traders! On the hourly chart, GBP/USD reversed to the upside and returned to the 38.2% retracement level of 1.2640. A bounce from this level will lead to a resumption of the downtrend towards the Fibonacci levels of 50.0% at 1.2576 and 61.8% at 1.2513. As we can see, all recent waves are very small, and they often alternate, indicating the weakness of bear traders who still attempt to push the pair further down.
The descending trend corridor indicates a bearish continuation. The peak of the last bullish wave is at 1.2665. The downtrend will unlikely end before a breakout through this level. Each subsequent low, as well as each subsequent peak, is lower than the previous one. If the pair breaks through the low of the last bearish wave at 1.2588 today or tomorrow, a new bearish wave will begin to form.
Yesterday, Q1 US GDP triggered the strongest reaction from traders. Gross domestic product unexpectedly rose by 2% in the first quarter, while traders expected growth by less than 1.3% QoQ. Additionally, support for the bears came from the report on initial jobless claims, with their number coming in at 239K instead of the expected 265K.
In the 4-hour time frame, a bearish reversal occurred after the CCI formed a bearish divergence and the price settled below 1.2674. The downtrend is likely to continue to 1.2485. Neither of the indicators shows an impending divergence. So, the downtrend will be intact.
Commitments of Traders:
The sentiment of non-commercial traders has become more bullish over the reporting week. The number of long positions increased by 25,184 and that of short positions dropped by 14,689. Overall, the sentiment of large traders remains bullish. Over the past two weeks, a wide gap between the number of long and short positions has appeared: 101,000 vs 55,000 respectively. The pound sterling has enough growth potential and the fundamental backdrop is favorable for it rather than for the US dollar. Nevertheless, we do not bet on a steep increase in the sterling in the near term because the market has already priced in the BoE's 0.50% rate hike.
Macroeconomic calendar:
US: Core PCE Price Index; Personal Spending; Michigan Consumer Sentiment.
The macroeconomic calendar contains three reports of secondary importance on Friday. The fundamental backdrop may have little influence on trader sentiment in the second half of the day.
Outlook for GBP/USD and tips for traders:
We sell after a bounce from 1.2640 on the 1-hour chart, with the target at 1.2576. If quotes close below 1.2576, we hold short positions to 1.2513 or until a buy signal is generated. We buy after the formation of 1-2 waves up and after a buy signal. It is now a bad idea to buy due to the downtrend.