On the hourly chart, GBP/USD on Monday declined to the support area of 1.3416–1.3425 and reversed near it in favor of the pound. This resumed the upward movement toward the 76.4% retracement level at 1.3482. Consolidation above this level would increase the likelihood of further growth toward the next Fibonacci level of 100.0% at 1.3586.
The wave pattern remains “bearish.” The last completed upward wave broke the highs of the two preceding waves, but the last downward wave also broke all prior lows. Thus, the trend can still be considered “bearish,” although the news background has played a major role in shaping it. In my view, the news flow has already turned the pair in favor of the bulls, and the trend may soon shift to “bullish.” The situation remains mixed and depends largely on incoming news.
On Monday, the news background was absent, but on Tuesday traders received the first reports of the week. The UK unemployment rate for June stood at 4.7% (in line with expectations), average hourly earnings rose by 4.6% (slightly below market forecasts), and jobless claims fell by 6.2 thousand (compared with an expected increase of 19.7 thousand). This indicates that the UK data package was slightly better than expected. Thanks to these figures, bullish traders launched a new offensive, though they had been active in recent weeks regardless, as the news background has been on their side. I remind you that the most important topics are not supporting the dollar — the trade war continues, tariffs are being revised upward, and the Fed is moving closer to monetary policy easing. Therefore, I believe the bulls still have reasons to advance. Today’s U.S. inflation report could trigger a corrective pullback, but only if inflation comes in above forecasts.
On the 4-hour chart, the pair turned in favor of the pound after forming a bullish divergence on the CCI indicator and closing above the resistance zone of 1.3378–1.3435. This opens the way for continued growth toward the next Fibonacci level at 1.3795. No emerging divergences are currently observed on any indicator. The bullish trend may be restored.
Commitments of Traders (COT) Report:
The sentiment of the “Non-commercial” category became more bearish last week. The number of long positions held by speculators decreased by 22,164, while short positions fell by 889. However, the sharp drop in interest in the pound according to the COT data does not reflect the real market picture, as interest in the dollar is also declining. The gap between long and short positions currently stands at approximately 65,000 versus 98,000. Nevertheless, the pound continues to rise.
In my opinion, the pound still faces downside risks. The news background for the U.S. dollar during the first six months of the year was extremely unfavorable, but it is slowly starting to improve. Trade tensions are easing, key agreements are being signed, and the U.S. economy in the second quarter will recover thanks to tariffs and various types of investments in the country. At the same time, expectations of Fed monetary policy easing in the second half of the year could put significant pressure on the dollar.
News Calendar for the U.S. and the UK:
- UK – Unemployment Rate (06:00 UTC)
- UK – Average Hourly Earnings Change (06:00 UTC)
- UK – Change in Jobless Claims (06:00 UTC)
- U.S. – Consumer Price Index (12:30 UTC)
On August 12, the economic calendar includes four important releases, three of which have already been published and triggered a bullish offensive. The news background will continue to influence market sentiment in the second half of the day.
GBP/USD Forecast and Trading Tips:
Selling the pair is possible today upon a rebound from 1.3482 on the hourly chart, with targets at 1.3416–1.3425 and 1.3357–1.3364. Buying the pair previously required a rebound from the 1.3114–1.3139 zone. I recommended keeping those positions open with targets at 1.3357–1.3371, 1.3425, and 1.3470 — all of which have been reached. The morning rebound from 1.3416–1.3425 allowed for new buys with targets at 1.3482 and 1.3586.
Fibonacci grids are built from 1.3586 to 1.3139 on the hourly chart, and from 1.3431 to 1.2104 on the 4-hour chart.
