31.01.202411:34 Forex Analysis & Reviews: GBP/USD. January 31st. The bears are counting on Jerome Powell's support

On the hourly chart, the GBP/USD pair continued the downward process towards the support zone of 1.2584–1.2611 on Tuesday. The decline is weak, with neither bulls nor bears dominating the market. A bounce of the pair's rate from the zone of 1.2584–1.2611 will allow counting on a reversal in favor of the British and some growth towards the Fibonacci level of 61.8%–1.2715. Fixing below the zone will end the sideways movement, and expect a drop to 1.2513.

The situation with the waves needs to be clarified. Trends are currently quite short-term, and we often see single waves. The "bullish" sentiment among traders persists only due to the absence of the British pound falling below 1.2584. The last downward wave failed to break the level of 1.2611, near which the lows of all previous waves are located. Thus, the sideways trend persists until the pair exits the zone of 1.2584–1.2801.

The information background on Tuesday was quite weak for the British and the Americans. There were no important events in the UK; in the US, only the JOLTs report on job openings was released. It was slightly better than traders' expectations (9.026 million against 8.75 million). The previous month's value was also revised from 8.79 million to 8.925 million. This report supported the dollar, but we did not see a strong rise in the American currency again.

Today, the key event of the day is the Fed meeting. In my opinion, Jerome Powell's speech can influence traders' sentiment, but in the current circumstances, his rhetoric must be "hawkish," not "dovish." Otherwise, we will see a new decline in the dollar, which will guarantee keeping the pair in a sideways corridor.

On the 4-hour chart, the pair bounced from the level of 1.2745 and continued the downward process towards 1.2620. There are no emerging divergences with any indicator today, and the quotes have left the ascending trend corridor. The trend may continue to change to "bearish," but it will take time and require significant efforts from the bears, in particular, closing below the level of 1.2620. The sideways trend for the British remains and is visible to the naked eye.

Commitments of Traders (COT) report:

The sentiment of the "Non-commercial" trader category for the last reporting week has not changed. The number of long contracts in the hands of speculators increased by 6369 units, and the number of short contracts increased by 5863 units. The overall sentiment of major players changed to "bearish" several months ago, but at the moment, bulls again have a significant advantage. There is an almost twofold gap between the number of Long and Short contracts: 73 thousand versus 41 thousand.

The British pound still has excellent prospects for decline. Over time, bulls will continue to get rid of Buy positions, as all possible factors for buying the British pound have already been worked out. The growth we have seen in the last three months is correct. For more than a month, bulls have not pushed the level of 1.2745. However, the bears are in no hurry to go on the offensive and cannot cope with the zone of 1.2584–1.2611.

News Calendar for the US and the UK:

US – ADP Non-Farm Employment Change (13-15 UTC).

US – FOMC Meeting Minutes (19-00 UTC).

US – FOMC Press Conference (19-30 UTC).

On Wednesday, the economic events calendar contains several important entries in the US. The impact of the information background on today's market sentiment can be strong, but only in the second half of the day.

Forecast for GBP/USD and trader advice:

I will not consider selling the British pound today, as there are no signals, and the level of 1.2715 is being ignored. I do not see signals to buy now either, but a bounce from the support zone of 1.2584 – 1.2611 may be such. In this case, purchases are possible with the target of 1.2715. Sales will be possible when closing below the support zone.