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On the hourly chart, the GBP/USD pair rose to the 1.3268–1.3277 resistance level on Tuesday, rebounded from it, and reversed in favor of the U.S. dollar. As a result, the decline may continue today toward the 1.3158–1.3177 support level. Consolidation above the 1.3268–1.3277 level would open the way for further gains toward the next resistance level at 1.3349–1.3355.
The wave structure turned bearish following the FOMC meeting. The latest completed downward wave broke below the previous low, while the new upward wave failed to exceed the previous high. It is difficult to say how long the bears will be able to maintain their momentum, as the dollar's fundamental support does not appear particularly convincing. Nevertheless, from a broader perspective beyond the wave structure, the bears continue to dominate the market, while geopolitical developments and the FOMC's monetary policy continue to support further gains in the U.S. dollar.
Tuesday's news flow was relatively light for both the British pound and the U.S. dollar, but traders will have no shortage of important events today. In my view, the key event of the day is the speech by FOMC member Kevin Warsh. Following the June Federal Reserve meeting, the market adopted a more aggressively hawkish view of the Fed, which, in my opinion, does not fully reflect reality. Warsh stated that the Federal Reserve remains committed to combating elevated inflation. However, inflation may begin to slow on its own in the coming months due to declining oil prices. Therefore, further monetary tightening may ultimately prove unnecessary, even though the market has already been pricing in that scenario for at least two weeks. As I have noted previously, the recent appreciation of the U.S. dollar has not appeared entirely justified. Nevertheless, the market is entitled to form its own assessment of the situation. If Warsh reiterates today that the Fed remains prepared to raise interest rates, it would further validate the dollar's recent gains. Otherwise, the bulls may regain the initiative.
On the 4-hour chart, GBP/USD rebounded from the 100.0% Fibonacci retracement level at 1.3159, reversed in favor of the pound, and advanced toward the 76.4% Fibonacci level at 1.3277, where the rally was halted by a bearish divergence on the CCI indicator. A close above 1.3277 would allow traders to anticipate further gains toward the next Fibonacci retracement level at 61.8%.
Commitments of Traders (COT) Report:
Sentiment among the Non-commercial group became more bearish during the latest reporting week. The number of long positions held by speculative traders declined by 1,271, while short positions increased by 32,863. The gap between long and short positions now stands at approximately 41,000 versus 147,000. Bears have dominated the market in recent months. However, while this dominance previously appeared well justified, it has become more questionable as the fundamental backdrop has changed considerably. The bears currently hold an advantage of more than three to one.
I still do not believe in the emergence of a sustained bearish trend for the pound. However, in the near term, market direction will depend less on economic data, Trump's trade policy, or central bank monetary policy, and more on the duration, scale, and consequences of the conflict in the Middle East. In recent weeks, market sentiment has shifted toward expectations of peace, but negotiations between Iran and the United States may prove lengthy and difficult. Moreover, there is no guarantee that they will ultimately result in the signing of a nuclear agreement.
News Calendar for the U.S. and the U.K.:
The economic calendar for July 1 contains three events that can each be considered important. As a result, the impact of the fundamental backdrop on market sentiment is expected to increase during the second half of the day.
GBP/USD Forecast and Trading Tips:
Short positions were appropriate after a rebound from the 1.3268–1.3277 resistance level on the hourly chart, targeting the 1.3158–1.3177 support level. Long positions were possible following a rebound from the 1.3158–1.3177 support level, with a target at 1.3268–1.3277. That target has been reached. New long positions may be considered after a close above the 1.3268–1.3277 resistance level, targeting 1.3349–1.3355.
The Fibonacci grids are constructed using 1.3158–1.3655 on both the hourly and the 4-hour charts.
*Analiza tržišta koja se ovde nalazi namenjena je boljem razumevanju tržišta i ne pruža instrukcije za vršenje trgovanja.
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