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On the hourly chart, the GBP/USD pair bounced from the support zone of 1.2611–1.2620 on Friday, after which the bulls managed to push the pair slightly higher. However, the resistance zone at 1.2709–1.2734 was not tested, and the price has now reversed in favor of the US dollar, resuming its decline. As a result, the pound has a strong chance of closing below the 1.2611–1.2620 zone this week. Such a close would likely signal further declines toward the Fibonacci levels of 1.2570 and 1.2517.
The wave structure is straightforward. The last completed wave upward failed to break the previous wave's peak, while the ongoing downward wave has already broken through the two most recent lows. This confirms the continuation of the bearish trend. To signal a reversal, the pair would need to rise back to the 1.3000 level and close above the previous peak.
On Monday, there was no significant news for either the pound or the dollar. The pair's upward movement was driven solely by a rebound from the 1.2611–1.2620 zone. However, even in this case, the bulls were unable to sustain meaningful upward momentum. Another rebound from the 1.2611–1.2620 zone is possible today, but without major informational support, it will be extremely challenging for the pound to gain traction. There is very little impactful data expected today. In the U.S., the housing market index will be released in the afternoon, but it holds limited relevance to the FOMC's monetary policy. Key factors driving traders continue to be central bank interest rate decisions and U.S. political and foreign policy developments. These elements consistently push traders toward buying the dollar, and minor reports unrelated to these themes are unlikely to shift the current sentiment.
On the 4-hour chart, the pair has fallen to the 1.2620 level. I do not expect a rebound from this level or subsequent growth. A decisive break below 1.2620 would increase the likelihood of further declines. The next target would be the 76.4% Fibonacci retracement level at 1.2565. Frequent bullish divergences, which have been forming regularly, currently hold little relevance for traders.
The Commitments of Traders (COT) report provides insight into market sentiment and positioning. For the most recent reporting week, sentiment among "Non-commercial" traders became slightly more bullish. The number of long positions held by speculators decreased by 745, while short positions increased by 11,711. Despite this, bulls maintain a strong lead, with 120,000 long positions compared to 64,000 short positions.
In my view, the pound remains under pressure, and the COT report confirms an increase in bearish sentiment. Over the past three months, long positions have risen from 102,000 to 120,000, while short positions have increased from 55,000 to 64,000. I anticipate that professional traders will continue to reduce long positions or increase shorts, as most positive drivers for the pound have already been exhausted. Technical analysis also supports the continued decline of the pound.
Tuesday's economic calendar lacks any major reports. As a result, the news background is expected to have minimal or no impact on trader sentiment.
The pair was available for selling after bouncing from the 1.3044 level on the 4-hour chart, targeting 1.2931. This target was hit twice. Subsequent targets of 1.2931, 1.2892, 1.2788–1.2801, 1.2752, and 1.2611–1.2620 were also reached. A close below the 1.2611–1.2620 zone will provide an opportunity to stay in short positions, targeting 1.2570 and 1.2517. I do not recommend buying the pair during the current bearish trend.
Fibonacci retracement grids are built from 1.3000–1.3432 on the hourly chart and from 1.2299–1.3432 on the 4-hour chart.
*Analiza tržišta koja se ovde nalazi namenjena je boljem razumevanju tržišta i ne pruža instrukcije za vršenje trgovanja.
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