On the hourly chart, the GBP/USD pair executed a new reversal in favor of the British pound on Thursday. They resumed the upward movement towards the 38.2% Fibonacci retracement level at 1.2565. A rebound of the pair's rate from this level will favor the US dollar and the resumption of the decline towards the 50.0% Fibonacci level at 1.2464. Maintaining quotes above the level of 1.2565 increases the likelihood of further growth towards the next level at 1.2611. In the short term, bulls continue to attack, but the "bearish" trend persists.
The wave situation has mostly stayed the same lately. The last completed downward wave broke the low of the previous wave, and the new upward wave has yet to approach the last peak from April 9. Thus, the trend for the GBP/USD pair remains "bearish," and there are no signs of its completion at the moment, despite the two-week rise of the British pound. The first sign of bulls transitioning to the offensive could be a breakout of the peak from April 9, but bulls need to cover a distance of about 200 points to the zone of 1.2705–1.2715. Therefore, a trend change to "bullish" is unlikely in the coming days. A new downward wave, if weak and fails to break the low from April 22, could also indicate a trend change.
On Thursday, the information background was very weak. Traders only saw the report on initial jobless claims, which did not evoke any emotions. Today, the background will be much stronger. The behavior of the dollar in the coming weeks will depend on reports on the labor market and unemployment. If it turns out that along with the GDP decline, payroll figures and ISM business activity have also fallen, this could significantly negatively affect the bears' desire to attack. At the same time, the unemployment rate may rise, as may wage indicators. It should be understood that wage growth is a positive factor for the dollar while rising unemployment is negative. All reports from the US should be combined today and come to a single conclusion.
On the 4-hour chart, the pair has returned to the upper line of the descending trend channel. A rebound of the pair from this line will favor the American and mark the beginning of a new decline towards the level of 1.2450. Consolidation of the pair's rate below this level will favor the continuation of the decline toward the corrective level of 50.0% (1.2289). Long-term growth of the British pound can be expected only after consolidation above the corridor. No impending divergences are observed today.
Commitments of Traders (COT) report:
The sentiment of the "non-commercial" trader category over the last reporting week has become more "bearish." The number of long contracts held by speculators decreased by 23341 units, while the number of short contracts increased by 11511 units. The overall sentiment of major players has changed, and now bears dictate their terms in the market. The gap between the number of long and short contracts is: 48 thousand versus 75 thousand.
In my opinion, prospects for a decline remain for the British pound. Over the past 3 months, the number of long positions has decreased from 62 thousand to 48 thousand, while the number of short positions has increased from 47 thousand to 75 thousand. I believe that over time, bulls will start to unwind their buy positions or increase sell positions, as all possible factors for buying the British pound have already been exhausted. The bears have demonstrated their weakness and complete reluctance to go on the offensive over the past few months, but I still expect the British pound to begin a stronger decline.
News Calendar for the US and UK:
UK – Services Purchasing Managers' Index (08:30 UTC).
US – Nonfarm Payrolls Change (12:30 UTC).
US – Unemployment Rate (12:30 UTC).
US – Average Hourly Earnings Change (12:30 UTC).
US – ISM Services Purchasing Managers' Index (12:30 UTC).
Friday's economic events calendar contains many important entries, most of which are in the US. The impact of the news background on market sentiment today can be very strong.
Forecast for GBP/USD and Trader Advice:
Selling the British pound is possible today on the hourly chart on a bounce from the level of 1.2565, with targets at 1.2517 and 1.2464. Buying the pair was possible on a bounce from the level of 1.2464, with a target at 1.2565. These trades can now be kept open, but cautiously, as a decline may begin today. New purchases are possible on a close above the level of 1.2565, with targets at 1.2611 and 1.2745.