On the hourly chart, the GBP/USD pair continued its decline on Friday, moving towards the support zone of 1.2363–1.2370. By Monday morning, the pair had dropped below the 261.8% retracement level at 1.2303. This suggests that the pound's decline could continue towards the next level at 1.2191. However, if the pair consolidates above 1.2303, it could support a recovery towards the resistance zone at 1.2363–1.2370.

The wave structure is quite clear. The last completed upward wave broke the previous wave's peak, while the new downward wave has yet to break the previous low. This implies that a bullish trend might still be forming. However, recent waves have been very small, and their structure can be interpreted in different ways.

I am not confident that we are seeing a sustained bullish trend that will last even a few more weeks.

The fundamental backdrop on Friday was very light, and the pound's decline on Monday is unrelated to economic data. No economic reports were released in the UK. US data on personal income, spending, and the PCE price index had minimal impact on traders. However, this no longer matters.

Donald Trump has imposed tariffs on Mexico, Canada, and China, and has threatened tariffs on the European Union. According to Trump, Canada and Mexico are not cooperating with Washington on drug trafficking and immigration. The EU is not buying agricultural products or cars from the US, while the US imports large amounts of goods from the EU. China is buying too little from the US while selling too much.

In response, Canada has announced 25% retaliatory tariffs. China has filed a complaint with the WTO against the US, citing violations of international trade rules.

Regardless of how this unfolds, the markets could remain volatile for an extended period, and global stability certainly hasn't improved.

On the 4-hour chart, the pair reversed in favor of the US dollar within an ascending trend channel, having failed to consolidate above it. Further declines are possible, but I believe the pound may recover today. Given Monday's movements, technical analysis is challenging. Significant price changes may occur regardless of the chart patterns in the near term.

Commitments of Traders (COT) Report:

The Non-commercial traders' sentiment became even more bearish in the latest reporting week. Long positions held by speculators decreased by 16,365. Short positions also fell by 2,950.

However, bulls have lost all market advantage, a process that has been ongoing for several months. The gap between long and short positions now favors bears: 59,000 long vs. 81,000 short.

In my view, the pound still faces downward potential, and COT reports consistently indicate strengthening bearish positions almost every week. Over the past three months, long positions have fallen from 161,000 to 59,000, while short positions have risen from 67,000 to 81,000.

I believe that professional traders will continue to reduce long positions or increase shorts, as all bullish factors for the pound have already been priced in. While technical analysis currently signals potential growth, corrections are also expected.

News Calendar for the US and UK:

• UK: Manufacturing PMI (09:30 UTC)
• US: Manufacturing PMI (14:45 UTC)
• US: ISM Manufacturing PMI (15:00 UTC)

Although the economic calendar includes several entries on Monday, they are unlikely to influence traders much after the tariff news from Donald Trump.

GBP/USD Forecast and Trader Recommendations:

Selling opportunities will arise if the pair remains below the ascending trend channel on the hourly chart, but it's crucial to wait for market stabilization. Today, the pound could rise towards the 1.2363–1.2370 resistance zone if it consolidates above 1.2303 on the hourly chart. Around the 1.2363–1.2370 zone, consider new selling opportunities.

Fibonacci Levels:

• Hourly chart: 1.3000–1.3432
• 4-hour chart: 1.2299–1.3432