On the hourly chart, the GBP/USD pair on Wednesday experienced an upward movement towards the upper line of the descending trend corridor, a rebound from it, and a reversal in favor of the US dollar, resulting in a drop below the correction level of 1.2342. Thus, the decline in British currency quotes may continue towards the next Fibonacci level of 161.8% (1.2250). The descending trend corridor characterizes traders' sentiment as "bearish," but nothing has changed.
The wave situation also indicates a need for change. A new downward wave has formed over the past five to six days, easily breaking through the previous lows. Yesterday, an upward wave formed, but it had no chance of reaching the peak of the previous wave. Then, the price sharply dropped, indicating the formation of a new downward wave, which had already broken yesterday's low. Thus, there are no signs of the end of the "bearish" trend.
Today, everything will depend on the Bank of England meeting results. Traders have no doubts that the rate will increase by 0.25%, but there are no conclusions for the British pound from this. With an expected decision by the regulator, the market often tries to anticipate this decision in advance. We don't see anything like that now. If traders clearly understand that the rate will rise again and still get rid of the British pound, the chances of growth after announcing the meeting results will also remain low. Growth for the British pound is possible today, but the probability of its further decline is much higher. The market is simply not set up "bullishly" right now.
The information background will be very strong for the second day in a row, but in any case, for the trend to change to "bullish," the pair needs to rise to at least the 1.2440 level. This is 140 points higher than the current price. The Bank of England's decision must be very "hawkish" for the British pound to show such growth.
On the 4-hour chart, the pair continues its downward movement. A rebound from 50.0% (1.2289) will favor the British pound and some growth towards the upper line of the descending trend corridor. The consolidation of the pair's rate below 1.2289 will increase the probability of further decline towards the next level of 1.2008. The impending "bullish" divergence on the RSI indicator increases the likelihood of a rebound from 1.2289.
Commitments of Traders (COT) Report:
The sentiment of the "non-commercial" trader category became less "bullish" over the past reporting week. The number of long contracts held by speculators increased by 4720 units, while the number of short contracts increased by 4930. The overall sentiment of large players remains bullish, and there is still an almost two-fold gap between the number of long and short contracts: 97 thousand versus 51 thousand. The British pound had good prospects for further growth a few weeks ago, but now, many factors have favored the US dollar. I do not expect a strong rise in the pound soon. Over time, bulls will continue to get rid of buy positions, just like in the case of the European currency. The only thing that can change the situation in the market is if the Bank of England continues to raise the rate longer than planned. We will find out the exact answer to this question this week.
News Calendar for the US and the UK:
United Kingdom - Bank of England Interest Rate Decision (11:00 UTC).
United Kingdom - Bank of England Monetary Policy Committee Meeting Minutes (11:00 UTC).
United Kingdom - Bank of England Inflation Letter (11:30 UTC).
United States - Federal Reserve Bank of Philadelphia Manufacturing Activity Index (12:30 UTC).
United States - Initial Jobless Claims (12:30 UTC).
United States - Existing Home Sales (14:00 UTC).
Thursday's economic calendar contains many interesting entries. The impact of the news background on market sentiment today can be very significant.
Forecast for GBP/USD and trader advice:
Selling the British pound was possible on the bounce from the level of 1.2440, with targets at 1.2342. The target has been reached. New sales were possible upon closing below 1.2342, with targets at 1.2289 and 1.2250, but today's drop could be even stronger. For buying today, a rebound from the level of 1.2289 is required, with targets at 1.2342 and 1.2440.