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On the hourly chart, GBP/USD continued to hover around the resistance zone of 1.2611 – 1.2620 on Tuesday. A rebound from 1.2611 – 1.2642 would favor the U.S. dollar and signal a decline toward the 61.8% Fibonacci retracement level at 1.2538 and the support zone of 1.2488 – 1.2508. A breakout above 1.2642 would increase the likelihood of further growth toward 1.2709.
The wave structure is quite clear. The last completed downward wave did not break the previous low, while the last upward wave surpassed the previous peak. This suggests that a bullish trend remains in place. However, recent waves have varied significantly in size, making trend identification less straightforward. While I am not entirely convinced that the bullish trend will persist for weeks, it is impossible to ignore the strong upward momentum of the British pound in recent weeks.Tuesday's fundamental backdrop was strong for the pound, yet traders showed little interest. The unemployment report, which came in lower than expected, had no impact. The wage growth report, which exceeded forecasts, also failed to generate a reaction. Bulls had an opportunity to push higher but remained on the sidelines, likely awaiting the more crucial UK inflation report. Released just an hour ago, the report revealed a sharp increase in consumer prices. The core inflation rate jumped from 3.2% to 3.7% year-over-year, while the headline rate rose from 2.5% to 3.0%, both exceeding expectations. This provides another reason for bullish traders to press their advantage. However, the pound has been rallying for a considerable time, and the 1.2611 – 1.2642 resistance zone remains a strong barrier. I am not confident that buyers have enough strength to break through.On the 4-hour chart, GBP/USD remains in an uptrend and has entered the 1.2565 – 1.2620 resistance zone. If bulls continue to push higher without fresh fundamental support, the pound could extend gains further. However, given the current lack of supporting macroeconomic data, technical analysis holds greater weight for decision-making in the market.
The latest COT report indicates that sentiment among non-commercial traders has become less bearish over the past week. The number of long positions held by speculative traders increased by 3,645, while short positions decreased by 4,510. Bulls have lost any significant advantage, but bears have also struggled to strengthen their position. The gap between long and short positions still favors the bears: 69,000 vs. 72,000.
I still see downward risks for the pound. COT data signals a gradual strengthening of bearish sentiment. Over the past three months, long positions have fallen from 120,000 to 69,000, while short positions have remained relatively stable, decreasing slightly from 75,000 to 72,000. I expect institutional players to gradually offload long positions or increase short exposure, as most bullish catalysts for GBP/USD have already played out. While the technical picture currently supports an uptrend, corrections should not be ruled out.
Among these, the UK inflation report has already been released, and its impact on market sentiment is fading. The remaining US data is of lower significance and unlikely to cause major volatility.
Sell positions can be considered if the pair rebounds from 1.2611 – 1.2642 on the hourly chart, with targets at 1.2538 and 1.2508.
Buy positions were viable after a breakout above 1.2363 – 1.2370, with a target of 1.2488 – 1.2508. This target has already been reached, so I am not currently considering new buy trades.
Fibonacci retracement levels are drawn from 1.2809 – 1.2100 on the hourly chart and from 1.2299 – 1.3432 on the 4-hour chart.
*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.
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