On the hourly chart, the GBP/USD pair made a new reversal in favor of the US dollar on Friday, settling below the level of 1.2175 and falling almost to the level of 1.2112. There was no rebound from this level, so we didn't get a buy signal. The fixation of quotes above 1.2175 today will work in favor of the British currency and the resumption of growth towards the Fibonacci level of 61.8%–1.2250. A drop in the pair's rate below 1.2112 will increase the likelihood of further decline towards the corrective level of 200.0%–1.2039.
The British pound's 200-point fall at the end of last week led to a break of the October 9th low. Thus, we received the first sign of a trend change to "bearish." However, I assume that this time the "bearish" trend will be weak and short-lived. I don't see strong reasons for a significant increase in the US dollar this week. There were very few, even at the end of last week. The rhetoric of FOMC members is starting to shift in a "dovish" direction, which should put pressure on the US dollar, not the other way around.
As for the British pound, it currently lacks support as well. No significant news is coming from the UK, and the Bank of England is preparing to complete the tightening process (or has already completed it). Therefore, there is no reason for the US dollar or the British pound to rise. What's the conclusion? Horizontal movement is possible. This week, the pair might experience a decline to the level of 1.2039 before beginning a new "bullish" trend toward 1.2336. It may reverse in the range of 1.2112-1.2175 with further growth towards 1.2336. Traders should be prepared for such movements. On Monday, there is no news background, so trader activity may be weak.
On the 4-hour chart, the pair consolidated above the Fibonacci level of 50.0%–1.2289 but then immediately started a new decline. The "bearish" divergence on the CCI indicator strongly assisted it, and there was no consolidation above the descending corridor. The impending "bullish" divergence on the CCI indicator was canceled. In fact, the decline in quotes may continue on the 4-hour chart, but for both pairs, a complex and confusing chart pattern has emerged.
Commitments of Traders (COT) report:
The sentiment among "non-commercial" traders over the past reporting week has become more "bearish." The number of long contracts held by speculators decreased by 7,621 units, while the number of short contracts decreased by 4,253 units. The overall sentiment of major players has shifted to "bearish," and the gap between the number of long and short contracts is widening, but now in the opposite direction: 66,000 versus 76,000. In my view, the British pound still has excellent prospects for further decline. I don't expect a strong pound sterling rally in the near future. I believe that over time, bulls will continue to liquidate their buy positions, similar to what has been happening with the euro. Only a close above the descending corridor on the 4-hour chart would make me consider a new "bullish" trend. I'm not expecting a drop in the British pound this week, but I consider it a possibility.
Economic Calendar for the USA and the UK:
On Monday, the economic calendar contains absolutely nothing of interest. The impact of the news background on market sentiment will be absent today.
Forecast for GBP/USD and trading recommendations:
Selling the British pound was possible when closing below the ascending corridor on the hourly chart, with targets at 1.2250 and 1.2175. Both targets have been met. New sales of the British pound were possible when closing below 1.2175, with targets at 1.2112 and 1.2039. Purchases today are possible on an hourly chart rebound from the level of 1.2112 or a close above 1.2175.
