On the hourly chart, the GBP/USD pair traded horizontally all day Wednesday. Neither the Fed meeting nor Jerome Powell's speech, nor other economic data throughout the day, provided any support. Today, however, the pair has sharply fallen to the support zone of 1.2788–1.2801. A rebound from this zone will favor the pound and some growth towards the 100.0% Fibonacci level at 1.2892. Settling the pair's rate below this zone will increase the likelihood of further decline towards the levels of 1.2752 and 1.2705.
The wave situation has slightly changed. The last completed downward wave (which has been forming since June 12) managed to break the low of the previous downward wave, and the last upward wave managed to break the peak of the previous upward wave. Thus, we are currently dealing with a bullish trend. The pound's growth may continue, but traders are now forming a corrective downward wave. From a wave perspective, there is no talk of a trend change to bearish. For this, the pair needs to break the last low from July 2. Whether the bears have enough strength to reach this level is a big question.
The information provided on Thursday promises very interesting movements. The pound has already fallen by 60 points in the morning, although yesterday's statements by Jerome Powell were more likely to work against the dollar. However, we may have seen traders' reaction to the highly anticipated rate cut by the Bank of England, which may be announced in a couple of hours. In my opinion, regardless of the Fed's decisions, the GBP/USD pair will continue to decline. The market has long overlooked the start of monetary policy easing by the Bank of England, which may have started earlier than in the U.S. For a long time, the market has priced in a Fed rate cut in the dollar's rate, which has not even started yet. Therefore, the decline of the pound is logical given any informational background.
On the 4-hour chart, the pair bounced back from the 1.3044 level, forming a bearish divergence on the RSI indicator. Earlier, the RSI indicator entered the overbought zone. Thus, several sell signals were received on the higher chart. The decline process may continue towards the 61.8% correction level at 1.2745. A rebound of the pair's rate from the 1.2745 level may temporarily halt the pound's decline.
Commitments of Traders (COT) Report:
The sentiment of the "Non-commercial" trader category has become even more bullish over the last reporting week. The number of long positions held by speculators increased by 5,202, while the number of short positions decreased by 4,079. Bulls still hold a solid advantage. The gap between the number of long and short positions is now 142 thousand: 188 thousand versus 46 thousand.
The pound still has the potential to fall, but the COT reports currently suggest otherwise. Over the last three months, the number of long positions has increased from 98 thousand to 188 thousand, while the number of short positions has decreased from 54 thousand to 46 thousand. Over time, professional players will start to shed long positions or increase short positions again, as all possible factors for buying the pound have already been worked out. However, it is important to remember that this remains a hypothesis. Graphical analysis indicates a likely decline in the near future, but this does not mean that the decline will last several months or half a year.
News Calendar for the U.S. and the U.K.:
U.K. – Bank of England rate decision (11:00 UTC).U.K. – MPC vote outcome on rates (11:00 UTC).U.K. – Speech by Bank of England Governor Andrew Bailey (13:15 UTC).U.S. – Initial jobless claims (12:30 UTC).U.S. – ISM Manufacturing PMI (14:00 UTC).On Thursday, the economic events calendar contains a new batch of important entries. The impact of the information background on market sentiment today can be strong.
GBP/USD Forecast and Trading Tips:
Selling the pound was possible upon the rebound from the 1.3044 level on the 4-hour chart, with the target being the lower boundary of the upward channel. These sales can be kept open, with the target being the zone of 1.2788–1.2801, which has already been reached. Settling quotes below this zone will allow maintaining sales with targets of 1.2752 and 1.2705. Purchases will be possible with a rebound on the hourly chart from the zone of 1.2788–1.2801 with a target of 1.2892.
Fibonacci grids are built from 1.2892–1.2298 on the hourly chart and from 1.4248–1.0404 on the 4-hour chart.