On the hourly chart, the GBP/USD pair reversed in favor of the US dollar on Friday and, with great difficulty, consolidated below the corrective level of 200.0% (1.3105) and the last trend line. This consolidation does not open up any significant prospects for the dollar, as the downward retracement is minimal, and the ascending trend line is the third in the current bullish trend. Nevertheless, before consolidating above the 1.3105 level, one can expect a slight rise in the US currency. The closing of the pair's exchange rate above the 1.3105 level will again work in favor of the British pound and the resumption of growth towards the 1.3181 level.
The waves tell us only one thing right now - the bullish trend is intact. Even the formation of a new downward wave on Friday and Monday does not allow us to say that the bearish trend is complete or ending. Peaks of ascending waves continue to be updated, as well as the lows of these waves. Thus, at the moment, everything remains as before.
The consumer sentiment report in the US on Friday did not support the dollar, and all British statistics during the week did not exert any pressure on the British pound. The pound has risen too much given the information background of last week. But, as I have already mentioned, the market is currently looking at what is happening in the US and the UK from a certain angle, and this angle is not in favor of the dollar. With the current chart pattern, the pair can continue the growth process.
This week, there will be a report on British inflation, one of several most important sources of inspiration for bullish traders. Therefore, we can expect further growth. The market trusts the Bank of England more than the Federal Reserve.
On the 4-hour chart, the pair consolidated above the 1.3044 level. Thus, the upward movement of the quotes can continue toward the next corrective level of 76.4% (1.3314). A bearish divergence has formed on the CCI indicator, which may indicate the beginning of a rise in the US dollar. However, this increase may be insignificant. Consolidating quotes below the 1.3044 level will also allow for a slight decline.
Commitments of Traders (COT) report:
The sentiment of the "Non-commercial" trader category has become more bullish over the last reporting week. The number of long contracts held by speculators increased by 15,206 units, while the number of short contracts only increased by 7,408. The overall sentiment of major players remains predominantly bullish, and there is a significant gap between the number of long and short contracts: 111,000 versus 53,000. The British pound has good prospects for further growth, and the current information background supports it more than the dollar. However, relying on a strong rise in the pound is becoming increasingly difficult. The market does not consider many factors that support the dollar, and the pound rises only on expectations of further rate hikes by the Bank of England.
News calendar for the US and the UK:
On Monday, the economic events calendar contains a few interesting entries. The influence of the information background will be absent for the rest of the day.
Forecast for GBP/USD and advice to traders:
Short positions on the bullish trend of the British pound are only possible in minimal quantities. For example, in the case of consolidation on the hourly chart below the 1.3105 level. Other signals can be considered if there are indications of a reversal on the charts. New purchases of the British pound can be considered when the pair closes above the 1.3105 level on the hourly chart, with a target of 1.3181. However, be cautious! The pound is rising disproportionately to the information background, and its growth may only last for a while.