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Yesterday, the GBP/USD pair reversed on the 1-hour chart and began to decline towards the lower line of the ascending trend channel. However, it failed to reach the target. On Wednesday morning, the pair reversed to the upside and resumed growth toward the level of 1.2342. If the price settles below the channel, the US dollar will strengthen and the quote will decline toward 1.2112 and 1.2007.
Traders have already focused on the Bank of England and the Fed's meetings. But there is more data to consider. We are talking about the inflation report in the UK. The CPI report published this morning came as a surprise even to those who were pessimistic about it. UK Inflation has been easing for several months, and many believed that the disinflation process has started. The Bank of England has raised the rate for the 10th consecutive time by now. The CPI was projected to decline to 9.8% but instead, it accelerated to 10.4% in February. Meanwhile, core inflation increased to 6.2%. Therefore, all the efforts by the BoE seem to have been in vain. Inflation is still running near its peak levels and is far from declining. The core inflation rate is also up.
Against this backdrop, bulls got more reasons to buy the pound. The Bank of England will either hike the rate by 0.50% tomorrow or will extend the period of monetary tightening, which is basically the same. It is not clear which scenario the regulator is considering, but traders believe that the response will be prompt. So, the pound may rise on these hopes. If the BoE disappoints the market tomorrow and lifts the rate by 0.25%, the pound sterling may slide.
On the 4-hour chart, the pair advanced to the Fibo retracement level of 127.2% at 1.2250, closing slightly above it. Due to the bearish divergence, the pair pulled back slightly. After the release of the downbeat inflation data, the price resumed its growth toward the level of 1.2441. Today and tomorrow, the fundamental background will play a key role.
Commitments of Traders (COT)
The non-commercial group of traders became less bearish on the pair over the past reporting week compared to the same reading two weeks ago. Notably, we are talking about the data posted two weeks ago. The CFTC still hasn't published any new reports. The number of long contracts opened by speculators rose by 7,549 and the number of short contracts increased by 1,227. The overall sentiment of large market players remains bearish as short positions still outnumber the long ones. Over the past few months, the situation has changed in favor of the British pound. However, the difference between the number of short and long contracts is still significant. The data is considered as of early March. Therefore, the prospects for the pound are getting better although GBP has been trading flat for the past few months. The price left the descending channel on the H4 chart which may support the pound. Yet, many factors contradict each other, and traders have different views on the pair.
Economic calendar for US and UK:
UK – Core CPI (07-00 UTC).
US – Fed Interest Rate Decision (18-00 UTC).
US – FOMC Press Conference (18-30 UTC).
On Wednesday, US and UK economic calendars are full of important events. So, the influence of the information background on the markets will be strong today.
GBP/USD forecast and trading tips
It is possible to sell the pound after a rebound from 1.2342 with the target at 1.2238. There was a chance to buy the pair after a bounce from 1.2007, considering a rise to 1.2112, 1.2238, and 1.2250. All the targets have been reached. The next target is seen at 1.2342.
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