On the hourly chart, the GBP/USD pair traded horizontally between the levels of 1.2513 and 1.2604 on Monday. Today, this trading character is still maintained. I believe that the rebound from the level of 1.2604 will work in favor of the US currency and lead to a decline in the pair to the level of 1.2513, while consolidation above the level of 1.2604 will increase the likelihood of further growth towards the next Fibonacci level of 61.8 (1.2730).
The wave situation currently raises no questions. The last downward wave broke the low of the previous wave, and at the moment, this breakout allows us to consider that the trend has changed to "bearish." The new upward wave that is forming at the moment is too weak to change the trend back to "bullish." For this, the pound needs to rise to the level of 1.2730, which may take at least a few days. Thus, even if the rise continues today and tomorrow, the trend will not change to "bullish" these days. It is much easier to wait for the next downward wave, and if it does not break the last low (1.2501), this will be a sign of the end of "bearish" ambitions.
The background information for the pound was absent on Monday, and on Tuesday, three reports were released in the UK. Considering that the pair is not showing strong movement today, it can be concluded that the reports did not evoke strong emotions among traders. After the release of reports on unemployment, claims for unemployment benefits, and wages, the pound fell by 30 points, but in the next 2 hours, it recovered. The unemployment rate in October remained unchanged at 4.2%, wages rose by 7.2% against the forecast of 7.7%, and the number of claims for unemployment benefits decreased by 12 thousand, with a forecast of +15 thousand. I think that the report on wages had the most significance. The growth rates have decreased more than traders expected, logically causing a decline in demand for the pound, as the market now expects a new slowdown in both headline and core inflation.
On the 4-hour chart, the pair has consolidated below the level of 1.2620, allowing it to count on further decline towards the next level of 1.2450. Earlier, I mentioned that a drop to the lower line of the ascending corridor would be quite logical. A rebound of the pair's rate from this line or the level of 1.2450 will allow the pound to start the process of growth, but for now, I am more inclined to consider the option of closing below the corridor and continuing the decline of the pound.
Commitments of Traders (COT) report:
The sentiment of the "Non-commercial" trader category for the last reporting week has become more "bullish." The number of long contracts in the hands of speculators increased by 5063 units, while the number of short contracts decreased by 14497 units. The overall mood of major players changed to "bearish" several months ago, but at the moment, bulls are attacking again. The gap between the number of long and short contracts is now increasing in favor of bulls: 66 thousand against 55 thousand. In my opinion, excellent prospects for the continuation of the decline remain for the pound. I still do not expect a strong rise in the British pound soon. I believe that the growth we have seen in the last month and a half is corrective.
News Calendar for the US and the UK:
UK – Unemployment Rate (07:00 UTC).
UK – Change in Average Earnings (07:00 UTC).
UK – Change in Jobless Claims (07:00 UTC).
US – Consumer Price Index (13:30 UTC).
On Tuesday, the economic events calendar contains four important entries. Only the report on inflation in the US is still ahead, which is most important for traders. The impact of the background information on the market sentiment today can be strong.
GBP/USD Forecast and Trading Tips:
I recommended selling the pound when consolidating below the level of 1.2604 with the target of 1.2513. This level was worked out on Friday. New sales are possible when closing below the zone of 1.2477 – 1.2513 with a target of 1.2407. Purchases were possible on the rebound from the level of 1.2513 with the target of 1.2604. Now these trades can be kept open.