On the hourly chart, the GBP/USD pair reversed in favor of the US dollar on Wednesday, falling towards the Fibonacci level of 23.6% (1.2321). A rebound in the pair's rate from this level will favor the British pound and a new rise towards the levels of 1.2477 and 1.2513. Fixing quotes below the level of 1.2321 increases the chances of further decline towards the next level of 1.2250.
The wave situation remains ambiguous for the pound. Look at the size of the last three waves. Waves can vary in size, but the stronger they are, the harder it is to determine the short-term trend. At the moment, the trend is clearly "bullish," but the pair can easily fall by 200-250 points within another "bearish" wave, and the "bullish" trend will not be violated. This is the current complexity: the waves are so large that within a "bullish" trend, a fall of 250 pips is quite possible. Determining the potential endpoint of the downward wave is extremely difficult.
Yesterday's decline in the pound was associated with a strong (or weak?) inflation report in Britain. The Consumer Price Index fell to 4.6%. And although traders expected a sharp drop (to 4.8%), even this figure was exceeded. The core Consumer Price Index fell from 6.1% to 5.7%, and traders' expectations were also exceeded in this case. Since inflation in the UK is still falling over time, the Bank of England may now refrain from further interest rate hikes. Well, for the Briton, demand for it may decrease. High inflation gave traders hope that the regulator would tighten monetary policy at least once more, but with each new inflation report, these hopes melt away.
On the 4-hour chart, the pair reversed in favor of the American and consolidated below 1.2450. Thus, the process of decline can be continued toward the next corrective level of 50.0% (1.2289). However, closing the pair's rate below the level of 1,2289 increases the probability of further decline towards the next level of 1.2035. There are no impending divergences at any of the indicators today.
Commitments of Traders (COT) report:
The mood of the "Non-commercial" trader category for the last reporting period is slightly less "bearish." The number of long contracts in the hands of speculators decreased by 6180 units, and the number of short contracts decreased by 10299 units. The overall sentiment of major players has long since changed to "bearish," between the number of long and short contracts, the gap is increasing, but now in the other direction: 57 thousand against 74 thousand. The pound still has excellent prospects to continue falling. I still do not expect a strong rise in the British pound soon. Over time, bulls will continue to get rid of buy positions, as is the case with the European currency. The growth we have seen in recent weeks is corrective.
News calendar for the US and the UK:
US - Philadelphia Fed Manufacturing Index (13:30 UTC).
US - Initial Jobless Claims (13:30 UTC).
US - Industrial Production (14:15 UTC).
On Thursday, the economic events calendar contains three interesting entries, but hardly any of them will cause a strong reaction from traders. The impact of the information background on market sentiment for the rest of the day may be weak.
Forecast for GBP/USD and trader recommendations:
I recommended selling the Briton on the rebound from 1.2477 on the hourly chart with targets at 1.2321 and 1.2250. These deals can be kept open now. I advise buying the pair on the rebound from the level of 1.2321, but I do not expect a strong rise in the pound.