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On the hourly chart, GBP/USD rebounded from the 1.2611–1.2620 support zone on Monday and rose by 50 points, though it was not enough to reach the 1.2709 level. Later that day, the pair returned to the 1.2611–1.2620 zone. Another rebound from this area today could lead to further growth toward 1.2709, while a break below this range would support continued decline toward the 61.8% Fibonacci level at 1.2538.
The wave structure remains clear. The last completed downward wave failed to break the previous low, while the most recent upward wave surpassed the previous high. This suggests that the bullish trend is still developing. However, recent waves vary significantly in size and offer multiple interpretations. There is no certainty that the current bullish trend will persist for weeks, but the pound has demonstrated strong growth in recent sessions.
There was no significant news on Monday, yet bullish traders continued to push the pound higher, likely due to momentum from previous weeks. The British pound had been strengthening thanks to positive UK economic reports, particularly regarding inflation and wage growth. While rising inflation is not necessarily good for the economy, it might encourage the Bank of England to take a more hawkish stance on monetary policy, which would be beneficial for the pound.
However, bears are now attempting to regain control, though they currently lack the strength and there are no major economic reports scheduled. Consequently, any break below 1.2611–1.2620 might be slow and uncertain. This week could see low trading volatility, as there are no scheduled UK economic releases.
The 4-hour chart confirms an ongoing uptrend, with the pair consolidating above the 1.2565–1.2620 resistance zone. The bullish momentum may extend toward the 61.8% Fibonacci level at 1.2728. The upward trend channel indicates a bullish market sentiment, and no divergences are currently observed on any indicator. A significant decline in the pound is only expected if the price breaks below this channel.
The Non-commercial trader category showed a less bearish sentiment last week. The number of long positions increased by 4,477, while short positions rose by 1,888. Bulls lost their market advantage, but bears have yet to gain substantial selling momentum. The market currently lacks a clear long vs. short imbalance, with 73,000 long positions and 74,000 short positions.
Over the past three months, long positions have declined from 120,000 to 73,000, while shorts have remained relatively stable (from 75,000 to 74,000). This suggests that institutional traders may continue reducing long positions or increasing short positions as most potential bullish catalysts for the pound have already been priced in. The pound recently received temporary support from strong UK economic data, but graphical analysis still signals a bullish outlook.
Tuesday's economic calendar includes only one minor release. Given its low market impact, fundamental drivers are unlikely to influence trading sentiment significantly.
Selling opportunities arise if the pair closes below the 1.2611–1.2620 zone on the hourly chart, targeting 1.2538.
Buying is not advisable at this stage, although bulls appear reluctant to exit the market. However, their upward momentum seems weak.
Fibonacci retracement levels:
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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