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On the hourly chart, the GBP/USD pair dropped by 130 points on Tuesday, and only toward the end of the day did the pound recover slightly from the bottom. Today, bearish traders have an excellent opportunity to continue selling, which will be discussed below. Thus, a consolidation of quotes below the 1.3526–1.3539 support level would allow for a decline toward the 100.0% corrective level at 1.3470. A rebound from the 1.3595–1.3620 level would also suggest a new drop in the pound.
The wave situation remains bearish. The last completed downward wave broke the previous low, while the last upward wave failed to break the previous high. To reverse the trend back to bullish, a consolidation above the last peak at 1.3730 or two consecutive bullish waves are required. The news background for the pound has been weak in recent months, but the news background in the United States has also rarely pleased traders. Donald Trump has regularly supported the bulls, but recently the pound has clearly been going through a "black streak."
Tuesday's news background was disastrous for the pound. We are talking about just one report that left a strong impression on traders. The unemployment rate in January rose to 5.2%, which triggered a massive sell-off of the British currency. The market believes that at the next meeting, the British regulator will be obliged to do everything possible to stop the rise in unemployment. This can only be achieved through monetary policy easing. This morning, the pound received another blow. Inflation in the UK slowed to 3% year-on-year, and core inflation to 3.1% year-on-year. Thus, the Bank of England has come even closer to another interest rate cut, which is certainly not good news for the pound. The bearish trend remains intact, so for now I see no grounds for growth in the British currency.
On the 4-hour chart, the pair rebounded from the 127.2% Fibonacci level at 1.3795 and has since continued declining toward the 1.3369–1.3435 support level. The bearish trend on the hourly chart has not been completed. A rebound from the 1.3369–1.3435 support level would allow for expectations of a renewed bullish trend toward the 1.3495 level. No emerging divergences are observed on any indicator today.
Commitments of Traders (COT) Report:
The sentiment of the "Non-commercial" trader category became slightly less bullish over the last reporting week. The number of long positions held by speculators decreased by 6,520, while short positions increased by 5,379. The gap between long and short positions now effectively stands at 88 thousand versus 114 thousand, and overall it is narrowing. In recent months, the bears have dominated, but it seems they may have exhausted their potential. At the same time, the situation with euro contracts is directly the opposite. I still do not believe in a sustained bearish trend for the pound under any circumstances.
In my view, the pound still looks less "dangerous" than the dollar, and that is its main advantage. In the short term, the U.S. currency may periodically enjoy demand in the market. But not in the long term. Donald Trump's policies have led to a sharp decline in the labor market, and the Federal Reserve is forced to ease monetary policy to stimulate job creation. U.S. military aggression also does not add optimism for dollar bulls.
News Calendar for the U.S. and the U.K.:
On February 18, the economic calendar contains five entries, with UK inflation standing out. The impact of the news background on market sentiment on Wednesday will be present, at least in the morning.
GBP/USD Forecast and Trading Tips:
Selling opportunities were available after price consolidation below the 1.3595–1.3620 level on the hourly chart, targeting 1.3526–1.3539. This target was reached. Today, selling will be possible on a rebound from the 1.3595–1.3620 level or after consolidation below the 1.3526–1.3539 level. Buying can be considered on a rebound from the 1.3526–1.3539 level or after consolidation above the 1.3595–1.3620 level on the hourly chart, with a target of 1.3755.
Fibonacci grids are drawn from 1.3470–1.3010 on the hourly chart and from 1.3431–1.2104 on the 4-hour chart.
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