On the hourly chart, the GBP/USD pair continued to rise on Thursday, consolidating above the resistance zone of 1.3357–1.3371 and the level of 1.3425. Thus, on Friday, the upward movement may continue toward the next retracement levels: 76.4% at 1.3470 and 61.8% at 1.3530. A consolidation below 1.3425 would favor the US currency and a decline toward the support zone of 1.3357–1.3371.
The wave structure remains bearish. The last completed upward wave broke above the peaks of the two previous waves, but the last downward wave also broke below all previous lows. Therefore, the trend can still be considered bearish, although the news background has played a major role in shaping it. In my view, the news background has now shifted in favor of the bulls, so the trend could soon turn bullish again. The situation is mixed and depends largely on upcoming news.
On Thursday, the news background could have triggered another bearish attack, but the picture is not as straightforward as it might seem. The Bank of England’s decision to ease monetary policy was priced in by traders in advance, as it had been anticipated in almost every forecast. At the same time, the rate cut decision was made in a way that signaled to the market that the next easing would not come soon. The MPC members were almost evenly split, with five voting for a rate cut and four against. It was the odd number of MPC members that allowed the rate cut to pass. Traders had expected monetary policy easing but were also counting on a more dovish stance from the MPC. As a result, after the vote results were announced, it was the bulls, not the bears, who took the lead. I would also note (as mentioned in the EUR/USD article) that the Fed may resume monetary easing as early as September, and the prospects for the US interest rate could soon depend more on Donald Trump’s decisions than on the country’s actual economic situation.
On the four-hour chart, the pair reversed in favor of the pound after forming a bullish divergence on the CCI indicator. The price rose toward the resistance zone of 1.3378–1.3435. No emerging divergences are currently observed on any indicator. A rebound from the 1.3378–1.3435 zone would favor the US dollar and a decline toward the 76.4% Fibonacci level at 1.3118. A close above 1.3378–1.3435 would open the way for further growth toward 1.3795.
Commitments of Traders (COT) report:
The sentiment among the “Non-commercial” category became bearish over the last reporting week. The number of long positions held by speculators decreased by 5,961, while the number of short positions increased by 6,637. However, the sharp drop in interest in the pound indicated by the COT reports does not reflect the actual market picture, as interest in the dollar also fell sharply on Friday. Currently, the gap between long and short positions is roughly 87,000 versus 100,000.
In my view, the pound still faces downside risks. In the first half of the year, the news background was extremely unfavorable for the US dollar, but it is now gradually shifting in a more positive direction. Trade tensions are easing, key agreements are being signed, and the US economy in Q2 is expected to recover thanks to tariffs and various types of investment in the US. At the same time, the Fed’s potential monetary policy easing in the second half of the year could put pressure on the dollar.
Economic calendar for the US and the UK:
On Friday, the economic calendar contains no noteworthy events. The news background will have no influence on trader sentiment today.
GBP/USD forecast and trader recommendations:
Selling the pair is possible today if it closes below 1.3425 or rebounds from 1.3470 on the hourly chart, targeting 1.3357–1.3371. For buying opportunities, a rebound from the 1.3114–1.3139 zone was required, which occurred on Friday and Monday. I recommended keeping those trades open with targets at 1.3357–1.3371, 1.3425, and 1.3470. Today, they can remain open until a close below 1.3425.
The Fibonacci grids are built from 1.3371–1.3787 on the hourly chart and from 1.3431–1.2104 on the four-hour chart.
