On the hourly chart, the GBP/USD pair traded on Wednesday around the 1.3437–1.3470 level, where all trading has been concentrated over the past few weeks. A rebound from this area would work in favor of the U.S. dollar and a modest decline toward the 1.3352–1.3362 support level. A firm break above it would allow for some growth toward the 1.3526–1.3539 resistance level. Market activity is currently very weak, and price movement is essentially sideways.
The wave structure remains "bullish." The most recently completed upward wave broke the previous peak, while the latest downward wave broke the previous low by only a few points, which is not enough to signal a trend change. The news background for the pound has been weak in recent weeks, but the U.S. news background also leaves much to be desired. Bears have been attacking over the past few days, but a break of the bullish trend would occur only below the 1.3403 level.
Wednesday's news flow did not support the bears as much as it could have. We saw fairly solid U.S. reports on producer prices and retail sales, but bears reacted to them very sluggishly. However, in recent weeks traders have been reacting weakly to virtually any events. Today, the UK released its November GDP report, and its reading, as usual, cannot be called strong or optimistic. The British economy is growing very slowly, which restrains bullish traders. I believe that UK statistics will not affect traders' sentiment today, as in recent days and weeks we have received enough information that is more important under the current circumstances. However, the market has chosen a strategy of "lying low and waiting." Sideways movement has been observed in recent weeks, and it is probably not worth expecting the November GDP report to change the current picture into something more pleasing to traders' eyes.
On the 4-hour chart, the pair has returned to the 1.3369–1.3435 support level. A rebound from this level would once again work in favor of the pound and a resumption of growth toward the next Fibonacci level at 127.2% (1.3795). A firm break below the 1.3369–1.3435 level would allow traders to expect a reversal in favor of the U.S. dollar and a decline toward the 1.3118–1.3140 support level. No emerging divergences are observed today.
Commitments of Traders (COT) Report:
Sentiment among the "Non-commercial" category of traders became more bullish over the latest reporting week. The number of long positions held by speculators increased by 6,994, while the number of short positions rose by 4,325. The gap between long and short positions now stands at roughly 76,000 versus 107,000 and is narrowing rapidly. Bears have dominated in recent months, but the pound seems to have already exhausted its downward potential. At the same time, the situation with euro contracts is exactly the opposite. I still do not believe in a bearish trend for the pound.
In my view, the pound still looks less "dangerous" than the dollar. 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 deterioration in the labor market, forcing the Fed to ease monetary policy in order to curb rising unemployment and stimulate job creation. U.S. military aggression also does not add optimism for dollar bulls.
News Calendar for the U.S. and the UK:
On January 15, the economic calendar contains four events, none of which are particularly important. The impact of the news background on market sentiment on Thursday will be weak or nonexistent.
GBP/USD Forecast and Trading Advice:
Selling the pair is possible today if there is a rebound from the 1.3437–1.3470 level on the hourly chart, with a target at 1.3352–1.3362. Buying can be considered today if the pair consolidates above the 1.3437–1.3470 level on the hourly chart, with a target at 1.3526–1.3539.
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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