Hi, dear traders! On the 1-hour chart, the GBP/USD pair rose to the resistance zone of 1.2705–1.2715 and rebounded from it on Tuesday. The instrument made a reversal in favor of the US dollar. This allows us to expect some decline in the direction of the support zone of 1.2584–1.2611. If the price settle above the zone of 1.2705–1.2715, it will increase the likelihood of further growth towards the next zone 1.2788–1.2801.
The situation with waves recently has not raised any questions. The last completed bearish wave easily broke the last low (from March 19), and the new bullish wave is not yet strong enough to break through the last high from March 21. Thus, the trend for the GBP/USD pair is bearish, and there are no signs of its end. The first sign of the bulls going on the offensive could be a breakout of the high from March 21. But to reach the 1.2788-1.2801 zone, the bulls need to cover a distance of about 140 pips, which is unlikely to happen in the coming days. If a new downward wave does not break the low of April 1, this will also be a sign of a change in the trend to bullish, but this wave has not even begun yet.
There was no important news for the pound sterling and the US dollar on Tuesday. However, today a crucial report on inflation will be released in the US, which is already causing conflicting sentiment. On the one hand, inflation may accelerate again, which will arouse another wave of hawkish comments from FOMC policymakers. Any increase in hawkish expectations provides support to the US dollar, which has been going through hard times in recent months. On the other hand, the greenback did not grow in response to the US nonfarm payrolls released last week. Besides, the US dollar ignores the fact that the number of potential rate cuts in 2024 has been steadily declining. Last but not least, the US currency does not react with growth to any events at all. Thus, the bulls may continue to attack, even if inflation in the US turns out to be higher than traders' expectations.
On the 4-hour chart, GBP/USD reversed in favor of the British pound after forming a bullish divergence at the RSI indicator and consolidation above the level of 1.2620. However, the bearish divergence of the CCI indicator enables us to expect a reversal in favor of the US dollar and some fall in the instrument. In my opinion, it will be short-lived. The bearish trend remains on the 1-hour chart, but on the 4-hour chart, the horizontal movement is going on.
Commitments of Traders Report (COT)
The sentiment of the non-commercial category of traders became a little more bullish over the last reporting week. The number of long contracts increased by 7,091, but the number of short contracts decreased by 1,153. The overall sentiment among major players remains bullish but has begun to weaken in recent weeks. The gap between the number of long and short contracts is already less than twofold: 98K versus 55K.
In my opinion, there are still prospects for the British pound to weaken, but over the past 3 months, the number of long contracts has increased from 61K to 98K, whereas the number of short contracts has remained virtually unchanged. I believe that over time, the bulls will begin to get rid of buy positions, since all possible factors for buying the British pound have already been worked out. However, the bears are still showing their weakness almost every week, which prevents the pound sterling from a downward move.
Economic calendar for US and UK
US: consumer price index due at 12-30 UTC
US: FOMC minutes due at 18-00 UTC
On Wednesday, the economic calendar contains two major reports. So, their influence of the information background over market sentiment will be strong today.
Outlook for GBP/USD and trading tips
Yesterday, short positions on the British pound could be opened on the condition of a dip from the zone of 1.2705– 1.2715 with the target at 1.2584–1.2611. Long positions were possible when GBP/USD closed above the 1.2584–1.2611 zone on the 1-hour chart with the target at 1.2705. This target was hit yesterday. Traders may open new buy positions when GBP/USD closes above the zone 1.2705–1.2715 with the target at 1.2788.
