On Friday, the GBP/USD pair closed at the levels of 1.2238 and 1.2112 as it continued to decline, according to the hourly chart. Therefore, Monday's decline in quotes continues in the direction of the 1.2007 level. It will be advantageous to continue the decline with a target of 1.1883 if the pair's rate is fixed below this level. Traders can anticipate a small increase in the direction of the Fibo level of 127.2% (1.2112) if there is a rebound.
For the euro/dollar pair, everything I said also holds for the pound/dollar pair. The same American statistics played a significant role for the British pound on Friday, which led to a significant strengthening of the US dollar. Therefore, there is nothing else to say. The Bank of England raised the interest rate by 0.50% on Thursday, but traders started to question if the current pace of tightening will continue at least until March. However, UK inflation is still extremely high. If the regulator hopes to reduce the consumer price index by at least a few points, the rate should be raised indefinitely. However, the rate has increased ten times in that time, while inflation is hardly changing. This leads me to the conclusion that the Bank of England can switch from a strategy of "rapid fall" to one of "as it turns out." According to Andrew Bailey, the bank's president, inflation would likely decline in 2023 with the help of falling energy prices. The majority of traders do not appear to believe in miracles or in the ability of the regulator to control inflation. The British pound could decline as a result of speculators anticipating the 0.50% rate increase in February and setting the pair's direction accordingly. But I believe that both of these elements were important. In the foreseeable future, the British pound can continue the trend of declining, the least target is 1.1840.
The pair is still falling in the direction of the 1.2008 level as seen on the 4-hour chart. The British pound will benefit from the rebound in prices from this level and some growth, but it is unlikely to be significant. The likelihood of a further decline in the direction of the next corrective level of 161.8% (1.1709) will rise if the pair's rate is closed at 1.2008. Emerging divergences are currently undetectable in any indication.
Report on Commitments of Traders (COT):
The "non-commercial" group of traders has been trading in a less "bearish" manner than they were a week ago. The number of long contracts held by investors dropped by 6,713 units, while the number of short contracts dropped by 7,476. The major players' overall outlook is still "bearish," and there are still more short-term contracts than long-term contracts. The situation has shifted in favor of the British pound over the last few months, but today the number of long and short positions in the hands of speculators has nearly doubled once more. As a result, the outlook for the pound has once again declined, but it is not eager to decline and is instead concentrating on the euro. An escape from the three-month ascending corridor was visible on the 4-hour chart, and this development may have stopped the pound's growth.
The following is the UK and US news calendar:
UK – index of business activity in the construction sector (11:30 UTC).
In the US, there are no particularly intriguing economic events scheduled for Monday, and in the UK, the single report for the day has already been released and had no discernible impact on the mood of traders. The rest of the day will not be impacted by the information background.
Forecast for GBP/USD and trading advice:
When quotes on the hourly chart were fixed below the level of 1.2238 with a target of 1.2112, I suggested selling the pound. The next target of 1.2007 is almost attained, and this target has been accomplished. With a target of 1.1883, new sales closed at a lower rate than 1.2007. On the hourly chart, the pair may be bought when it recovers from the 1.2007 level with a target price of 1.2112.