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On the hourly chart, the GBP/USD pair confirmed a breakout below the 1.2363 – 1.2370 support zone on Monday, suggesting a potential further decline toward the 261.8% corrective level at 1.2303. However, if the pair re-establishes itself above this support zone, an upward movement toward the 1.2488 – 1.2508 resistance zone could be expected.
The wave structure is clear. The last completed downward wave did not break the previous low. The last completed upward wave surpassed the previous peak. This suggests the formation of a bullish trend.
However, recent waves differ significantly in size and allow for multiple interpretations. There is no strong confirmation that the current bullish trend will persist for the next few weeks.
Monday lacked any significant economic news, but Tuesday will bring more developments with speeches from the heads of the Bank of England and the Federal Reserve. Jerome Powell will testify before the U.S. Congress on Tuesday and Wednesday with a report on monetary policy. This event holds significant intrigue for traders due to ongoing pressure from Donald Trump on the Federal Reserve. Trump is pushing for near-zero interest rates to stimulate economic growth and make U.S. exports more competitive. However, the Fed prioritizes price stability and sees no justification for rate cuts given persistently high inflation. Powell will likely face direct questions regarding Trump's influence on the Fed and how the central bank plans to manage monetary easing amid trade wars.
Andrew Bailey's speech will be less impactful, as the Bank of England recently cut interest rates last week. Not enough time has passed for a major shift in monetary policy stance.
On the H4 Chart, the GBP/USD pair has reversed in favor of the U.S. dollar, confirming a break below 1.2432. This suggests that the downtrend may continue toward the next Fibonacci level of 100.0% at 1.2299. A close above 1.2432 would signal a potential recovery as the pair exits the downward trend channel. No emerging divergences are currently observed on any indicators.
The Non-commercial traders' sentiment became less bearish last week. Long positions increased by 6,111 and short positions decreased by 4,238. However, bulls have lost their market advantage, which has been unfolding over the past several months. The gap between long and short positions remains in favor of bears (65K long vs. 76K short). Over the last three months, long contracts fell from 120K to 65K and short contracts rose from 75K to 76K.
This indicates that institutional traders are likely to continue reducing their long positions or increasing shorts, as most bullish catalysts for the British pound have already played out. Technical indicators suggest a short-term uptrend, but market corrections are still expected.
Key Economic Events for the U.K. and the U.S. (February 11)
United Kingdom – BoE Governor Andrew Bailey's Speech (12:15 UTC).
United States – Fed Chair Jerome Powell's Testimony (15:00 UTC).
These two major events will influence market sentiment today.
Trading Recommendations for GBP/USD
Selling the pair was valid after a rejection from the 1.2488 – 1.2508 zone, targeting 1.2363 – 1.2370 on the hourly chart. This target was successfully reached. Today's short-term target is now 1.2303. If the price breaks above this level, long positions can be considered with a target at 1.2488 – 1.2508.
Fibonacci levels are plotted as follows:
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