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On the hourly chart, on Wednesday, the GBP/USD pair made a second consecutive rebound from 1.2705, a turnaround in favor of the American currency, and a drop to 1.2517. Thus, the rise of the American currency amounted to almost 200 points in just a few hours. The rebound of quotes from the level of 1.2517 will work in favor of the British pound and may lead to some growth towards the level of 1.2584. Consolidating the pair's rate below 1.2517 increases the probability of further decline towards the next Fibonacci level of 38.2% (1.2453).
The wave situation recently does not raise any questions. The last completed upward wave failed to break the last peak (from March 21), and the new downward wave has already managed to break the low of the previous wave (from April 1). Thus, the GBP/USD pair trend remains "bearish," and there are no signs of its completion. The first sign of a transition of bulls to the offensive could be a breakthrough of the peak on April 9. However, bulls now need to overcome a distance of about 190 points to the zone of 1.2705–1.2715, which is unlikely to happen in the coming days.
On Wednesday, the rise of the US dollar was associated only with one event - the US inflation report. It isn't easy to guess what traders were counting on before the publication. The Consumer Price Index would accelerate in any case; the question was only how much. However, traders did not expect an increase of up to 3.5% immediately. The core consumer price index remained at 3.8%, although traders expected it to decrease. Thus, both indicators disappointed the bullish traders, who had to retreat from the market hastily. The dollar's rise was warranted and looming even last week when strong Nonfarm Payrolls and unemployment reports failed to spur the dollar's growth, which would have been logical. I expect the Federal Reserve's hawkish rhetoric to persist, which could further support the dollar and the bears.
On the 4-hour chart, the pair favoured the American currency after forming a "bearish" divergence at the CCI indicator and consolidation below the level of 1.2620. Thus, the decline in quotes may continue toward the level of 1.2450. However, I want to remind you that horizontal movement on the 4-hour chart persists. The further decline of the pair is not obvious. A new descending trend corridor characterizes traders' sentiment over the past month as "bearish."
Commitments of Traders (COT) Report:
The mood of the "non-commercial" trader category has become slightly more "bullish" over the past reporting week. The number of long contracts held by speculators increased by 7091 units, while the number of short contracts decreased by 1153. The overall sentiment of major players remains "bullish," but it has started to weaken in recent weeks. The gap between long and short contracts is now less than twice as much: 98 thousand versus 55 thousand.
The prospects for a decline remain for the British pound. Still, over the past 3 months, the number of long contracts has increased from 61 thousand to 98 thousand, while the number of short contracts has remained practically unchanged. Over time, bulls will start to get rid of buy positions, as all possible factors for buying the British pound have already been worked out. However, bears continue to demonstrate their weakness almost every week, which prevents the pound from starting to decline.
News Calendar for the US and the UK:
US - Producer Price Index (12:30 UTC).
US - Initial Jobless Claims Change (12:30 UTC).
On Thursday, the economic events calendar contains two secondary entries. The impact of the information background on today's market sentiment will be weak, but the ECB meeting may leave its mark on the GBP/USD pair.
Forecast for GBP/USD and Trader Recommendations:
Sales of the British pound could have been opened on a rebound from the zone of 1.2705–1.2715 with a target zone of 1.2584–1.2611. This zone has been worked out and exceeded, so sales could be held with a target of 1.2517. New sales - when closing below 1.2517 with a target of 1.2453. Purchases are possible on an hourly chart rebound from the level of 1.2517 with a target of 1.2584–1.2611.
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