FX.co ★ GBP/USD analysis for August 14: British pound sets direction

On the hourly chart, the GBP/USD pair continued its downward movement after bouncing off the 61.8% correction level at 1.2801 on Friday and Monday. Currently, the pair is heading toward the 100.0% Fibonacci level at 1.2590. If the pair rebounds from this level, it could lead to some growth to the 76.4% Fibonacci level at 1.2720. If the quotes close below 1.2590, we can expect a drop to the next level at 1.2513.

Recent waves for the British pound indicated a horizontal trend in the past two weeks. They were notably small in size, barely surpassing previous peaks and lows. However, on Friday, the situation changed, and the bearish trend persisted after a two-week pause. Bulls did not take the initiative due to several reasons. The British pound has been weakening day by day for various reasons. First of all, it has surged for an extended period, often surprising economists. Second, the Bank of England is unlikely to raise rates for a year or more. Third, the US Federal Reserve maintains a hawkish stance, while US inflation unexpectedly increased in July. These factors are sufficient to expect a continued decline in the pair for some time.

Discussing further perspectives is premature, but the 4-hour chart is also favorable for bears, as I previously mentioned weeks ago when a close occurred below the ascending trendline.

On the 4-hour chart, the pair reversed in favor of the British currency after forming a bullish divergence with the CCI indicator. However, over the following 2 weeks, the pair struggled to surpass even 1.2846. On the hourly chart, horizontal movement persisted. Currently, no new impending divergences are observed with any indicators. Considering the current circumstances, a significant rally is unlikely to happen.

COT report:

The sentiment among non-commercial traders has become less bullish in the latest reporting week. The number of long contracts held by speculators decreased by 8,936, while short contracts decreased by 6,394. The overall sentiment among major players remains bullish, with long contracts significantly outnumbering short contracts: 83,000 versus 36,000. The British pound had promising growth prospects a few weeks ago, but now several factors have shifted in favor of the US dollar. Anticipating a strong surge in the pair becomes increasingly challenging. In recent weeks, markets have observed a reduction in bullish positions, with their numbers decreasing by nearly 50,000. Bearish positions are also decreasing, but the gap between them continues to widen.

US and UK economic calendar:

Monday's economic calendar is almost empty. The impact of the news background on market sentiment will be weak for the remainder of the day.

GBP/USD forecast and trading tips:

One could sell the British pound on a rebound from 1.2801 on the hourly chart with targets at 1.2720 and 1.2690. Both targets were reached. You may sell the currency on a rebound from 1.2720 with a target of 1.2590. This trade can be held open. For buying today, only one signal is possible – a rebound from 1.2590. At the same time, the pound's rise might be subdued.