On the hourly chart, the GBP/USD pair made a reversal in favor of the American currency on Tuesday, dropping below the level of 1.2175. The consolidation of quotes below this level allows for expectations of further decline towards the level of 1.2106, which serves as a support point for the bulls. If they fail to hold this level, the pound will move down with renewed vigor. The consolidation above the level of 1.2175 will favor the pound and new growth towards the corrective level of 161.8% (1.2250).
The wave situation became clearer after Monday's increase. The last wave upward broke through the three previous peaks, so the "bearish" trend has turned into a "bullish" one. Since the "bullish" trend has only just begun, it is too early to talk about its completion. Most likely, we will see a minimum of three waves rise to reach the level of 1.2336. To confirm the end of the "bullish" trend, a breakthrough at the level of 1.2106 is required. The second sign could be a new wave upward that does not reach the last peak (1.2287).
Business activity indices in the United Kingdom were more disappointing than pleasing. Despite growth in the manufacturing sector and a decline in the services sector by just 0.1 point, this meager statistic was enough to cause the pound to lose over 100 points. In the United States, business activity indices were also released, and unlike the British ones, they not only showed growth but also returned to the zone above the 50 mark, which ultimately dealt a blow to the pound on Tuesday. Perhaps the British pound did not deserve such a sharp drop, but what has happened has happened. Today will be a very important day for the bulls. If they do not quickly return above 1.2175, a return to 1.2106 can be expected.
On the 4-hour chart, the pair rose to the corrective level of 50.0% (1.2289), experienced a bounce from it, and made a reversal in favor of the US currency. A new decline has started towards the level of 1.2008. The quotes closed above the descending trend channel, but it is still very difficult to expect further growth for the pound. I believe there is a greater chance of a resumption of its decline. There are no emerging divergences in any of the indicators today.
Commitments of Traders (COT) report:
The sentiment of "non-commercial" traders in the latest report remained unchanged. The number of long contracts in speculators' hands decreased by 753 units, while the number of short contracts increased by 408 units. The overall sentiment of large players has turned "bearish," and the gap between the number of long and short contracts is widening in the opposite direction: 65 thousand versus 76 thousand. In my opinion, there are excellent prospects for the British pound to continue its decline. I do not anticipate a significant rise in the pound in the near future. I believe that over time, the bulls will continue to unwind their buy positions, as was the case with the European currency.
News Calendar for the US and the UK:
US - Building Permits (12:00 UTC).
US - New Home Sales (14:00 UTC).
US - Speech by the Fed Chairman, Mr. Powell (20:35 UTC).
On Wednesday, the economic events calendar for the UK and the US contained three entries, one of which was indeed significant. The impact of the news background on market sentiment for the remaining part of the day may have a moderate effect.
GBP/USD Forecast and Trader Advice:
Selling the pound was possible on the rebound from the level of 1.2289 on the 4-hour chart, with targets at 1.2250 and 1.2175. Both targets have been reached. Sales can be left open with a target of 1.2106 until the price closes above 1.2175. Buying opportunities today are possible on a close above 1.2175 with a target of 1.2250. Alternatively, on a rebound from 1.2106 with a target of 1.2175.
