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On the 1-hour chart on Wednesday, GBP/USD continued to rise and closed above the level of 1.2546. The pound may extend its uptrend towards the next Fibonacci retracement level of 127.2% at 1.2623. A bounce off this level may send the price lower while holding above it will open the way towards the target at 1.2718.
After a few weeks of having a break, bullish traders are once again advancing. The bears were given all the opportunities to push forward, but they chose not to. Even last night, there was a great opportunity to buy the US dollar, but nothing like this happened. The Fed's rate was lifted by 0.25%, and Jerome Powell did not rule out another hike in June. According to him, inflation remains too high, and the next reports will show whether it continues to move towards its target level. If not, it would be necessary to tighten monetary policy again.
In my opinion, the FOMC meeting results can be considered hawkish although not everyone may agree. However, as we can see, the US dollar did not appreciate these outcomes as well as the two US reports, which were objectively stronger than traders' expectations. I believe the market is currently making some incorrect decisions. Next week, the Bank of England may also raise its interest rate by 0.25%. Does it mean that the pound will show a decline when the central bank makes such a decision? Then there is not much point in following changes in monetary policy, as bulls rule the market, and only they decide what to do with the pair. The informational background has only a minor impact on their sentiment.
Today, there will be only a few interesting reports for the pound, but the European Central Bank meeting may also affect it. So, we shall be ready for some market movements on Thursday.
On the 4-hour chart, the pair settled below the ascending trend channel which indicates a possible change in the sentiment to bearish. However, a rebound from the level of 1.2441 allowed the pound to recover and sent the price to the Fibonacci level of 100.0% at 1.2674. An upcoming bearish divergence of the CCI indicator suggests a reversal of the pair and a return to the level of 1.2441. It would be quite logical to see a decline in these circumstances.
Commitments of Traders report
The sentiment of the non-commercial group of traders has become more bullish over the past week. The number of long contracts rose by 5,571 while the number of short contracts increased by 1,034. The overall sentiment of large market players is now completely bullish. Previously, the market had been bearish on the pair for quite a long time. Yet, the number of long and short contracts is almost equal, with 59,000 vs 53,000 respectively. The pound keeps rising but at a much slower pace than a few months ago. The outlook for the pound remains rather optimistic although it may decline in the near term. The information background no longer supports the bulls.
Economic calendar for US and UK
UK – Composite PMI (08-30 UTC)
UK – Services PMI (08-30 UTC)
US – Initial Jobless Claims (12-30 UTC)
On Thursday, the UK economic calendar has several important events, but we will also need to consider the results of the ECB meeting. So, the influence of the information background on the market sentiment can be strong today.
GBP/USD forecast and trading tips
I recommend selling the pound with the targets at 1.2546 and 1.2447 if the price pulls back from the 1.2623 level on the 1-hour chart. There was a buying opportunity after a rebound from 1.2447 with the targets at 1.2546 and 1.2575. Both targets have been reached.
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