FX.co ★ GBP/USD. August 17th. Inflation in the UK has fallen by only 4.3% in 9 months

On the hourly chart, the GBP/USD pair on Wednesday confirmed a new establishment above the corrective level of 76.4% (1.2720), and this morning – it also rebounded from this level upwards. Thus, the growth process can continue toward the next corrective level of 61.8% (1.2801). The pair's rate consolidation below the level of 1.2720 will allow the expectation of a resumption of the fall toward the Fibonacci level of 100.0% (1.2590). However, I would like to draw attention to the fact that the direction of the pair's movement has been horizontal for several weeks.

Waves also tell us now about the absence of initiative by bears or bulls. As I mentioned in previous articles, waves can renew and breakthrough past highs and lows, but the nature of the movement remains horizontal. Thus, the trend is neither "bearish" nor "bullish." The pair is in the approximate range of 1.2620 – 1.2790, and the direction of movement can change constantly within it.

Yesterday was quite strange for the pound. Two important reports were released: on inflation and core inflation. As traders expected, the main inflation rate dropped to 6.8%, while core inflation remained unchanged at 6.9%. Overall inflation has been declining for nine months but has managed to cover a distance of just 4.3% over this period. Core inflation is not declining, with its peak value of 7.1% reached in May. Therefore, I cannot say that consumer prices in the UK are slowing down. This is the case, but both indicators still need to be lowered, and the dynamics of their slowdown leave much to be desired.

On the 4-hour chart, the pair has returned to the corrective level of 61.8% (1.2745), but two "bearish" divergences have already formed with the CCI and RSI indicators. Thus, as I mentioned above, I am not expecting strong growth for the pair. A reversal in favor of the US dollar and a resumption of the decline toward the level of 1.2485 are more likely. However, a full consolidation above the level of 1.2745 will allow for the expectation of growth continuation towards the level of 1.2846 and will cancel the divergences.

Commitments of Traders (COT) report:

The sentiment of the "Non-commercial" trader category has become less "bullish" over the past reporting week. The number of long contracts held by speculators decreased by 8,936 units, while the number of short contracts decreased by 6,394. The overall sentiment of major players remains "bullish," and there is more than a twofold gap between the number of long and short contracts: 83,000 versus 36,000. The pound had decent growth prospects a few weeks ago, but many factors have favored the US dollar. Betting on a new strong rise in the pound is becoming more and more difficult. In recent weeks, we have seen bulls reduce their positions, which have already decreased by almost 50,000. Bear positions are also falling, but the gap is only widening.

The economic calendar for the US and UK:

US – Philly Fed Manufacturing Index (12:30 UTC).

US – Initial Jobless Claims (12:30 UTC).

On Thursday, the economic events calendar contains two not-so-important reports in the US. For the rest of the day, the influence of the news background on market sentiment will be weak.

GBP/USD forecast and trading advice:

Selling the pound is now possible upon a rebound from the levels of 1.2801 on the hourly chart or 1.2745 on the hourly chart. Targets – the nearest low waves on the hourly chart. For buying today, there is only one signal – closing above the level of 1.2720, but be careful – the pound's growth may be weak. Target – 1.2801.