On the hourly chart, the GBP/USD pair reversed in favor of the pound on Tuesday, gaining 115 points. Bullish traders decided to seize the favorable market situation and continue their attacks. However, yesterday's information background was very weak, and nothing suggested such a strong rise for the pound. However, a reversal in favor of the US dollar was executed today, and a significant decline began, consolidating below the corrective level of 61.8% (1.2715). Thus, the downward process may continue toward the next level at 1.2604.
The wave situation is beginning to change in favor of the bears. The last upward wave failed to break the previous peak (from December 15), so we have the first sign of a trend change to "bearish." If this is the case, we can expect a new downward wave with a minimum target in the zone of 1.2584–1.2604. However, the new "bearish" trend could be much longer.
On Tuesday, there was no information background in the UK; in the US, only insignificant reports were released that did not affect the market sentiment. However, this morning in the UK, a significant inflation report for November was released, and its value impressed traders. The Consumer Price Index dropped from 4.6% to 3.9%, although traders expected a decrease only to 4.4%. Core inflation decreased from 5.7% to 5.1%, with a forecast of 5.6%. Thus, both inflation indicators decreased significantly, enough for the Bank of England to soften its "hawkish" stance. Last week, Bank of England Governor Andrew Bailey allowed another rate hike, but now, they won't discuss an additional one.
The British pound confidently rose last week because the Bank of England may raise rates again, unlike the ECB and the Fed. However, the inflation report for November significantly reduces the likelihood of new tightening. Instead, we may start hearing about monetary policy easing in 2024. This is a significant reason for the pound to start falling after two months of growth.
On the 4-hour chart, the pair consolidated below the corrective level of 61.8% (1.2745). Thus, quotes remain within the ascending trend corridor, and the bounce from its upper line and the level of 1.2745 suggests a decline to the lower line. I will expect a strong decline in the pound only after consolidating below the ascending trend corridor. There are no emerging divergences with any of the indicators today. The rebound of quotes from the lower line of the ascending corridor will maintain the current bullish trend.
Forecast for GBP/USD and trader recommendations:
Sales of the pound could have been opened on the rebound from the zone of 1.2788–1.2801 and on closing below the level of 1.2715. Currently, these trades can be kept open with a target of 1.2604. All the day's most important reports are already known to traders, but their impact may last until the end of the day. Thus, I expect strong movements today in both the first and second halves of the day. Purchases will be possible on the rebound from the zone of 1.2584–1.2604 on the hourly chart with a target of 1.2715, but I do not expect a strong rise in the pound today.