On the hourly chart, the GBP/USD pair reversed in favor of the US dollar on Tuesday and settled below the corrective level of 61.8% (1.2715). Consequently, the quote's decline may continue today towards the support zone of 1.2584-1.2611. If the pair manages to reestablish itself above the level of 1.2715, it will favor the British pound and a resumption of the upward movement towards the resistance zone of 1.2788-1.2801. Be cautious, as the pair is currently in a horizontal range.
The wave situation remains ambiguous. Previously, I mentioned that the trends are currently quite short-term, and we often see single waves representing a complete trend. The "bullish" sentiment persists due to the absence of a decline in the British pound, but the waves do not provide much insight into what is happening in the market. The last downward wave failed to break the level of 1.2611, near which the lows of all previous waves are located. The new upward wave exceeded the peak of the previous one, so the British pound may still expect a return to the zone of 1.2788-1.2801. The current movement exhibits all the characteristics of a horizontal trend.
On Tuesday, there was no significant news for both the British pound and the US dollar. In essence, the market is already awaiting the US inflation report, which will be released tomorrow. What else can it do when there is no other news? Traders were quite active during the New Year week but have now decided to start celebrating the holidays belatedly.
Market activity could be stronger, and there needs to be a clear direction of movement. The US inflation report may help break the deadlock. Yesterday, Michelle Bowman from the FOMC stated that she is ready to vote for another rate hike if inflation stops declining or accelerates. The December inflation report may show a new rise. This information may support the bears, but the horizontal movement is unlikely to be canceled.
On the 4-hour chart, the pair has returned to the Fibonacci level of 61.8% (1.2745) and a new rebound from this level, which once again works in favor of the US dollar and a decline towards 1.2620. The horizontal movement between the levels of 1.2620 and 1.2745 is visible on the 4-hour chart. No impending divergences are observed in any of the indicators today, and the quotes have left behind the ascending trend corridor. The trend may continue to shift towards "bearish," but it will take some time.
Commitments of Traders (COT) Report:
The sentiment of "Non-commercial" traders has shifted in favor of the bulls during the last reporting week. The number of long contracts held by speculators increased by 3044 units, while the number of short contracts increased by 1931. The overall sentiment of large players changed to "bearish" a few months ago, but currently, the bulls have a slight advantage. There is a gap between the number of long and short contracts: 62 thousand versus 46 thousand, but the gap is small and almost unchanged.
The prospects for the British pound to fall remain excellent. I do not expect a significant rise in the British pound. The growth we have seen in the last three months is a correction.
Economic Calendar for the US and the UK:
On Wednesday, the economic events calendar contains a few interesting entries. The impact of the information background on market sentiment will be absent today.
GBP/USD Forecast and Trader Advice:
Selling the British pound was possible after settling below the level of 1.2715 on the hourly chart with a target of 1.2611. Selling was also possible in case of a rebound from the level of 1.2745 on the 4-hour chart. These deals can still be kept open. Buying today can be considered in case of a rebound from the level of 1.2611 on the hourly chart with a target of 1.2715.