On the hourly chart, the GBP/USD pair confirmed a breakout below the 1.2488–1.2508 zone on Thursday, followed by a decline towards the 1.2363–1.2370 support area. The pair rebounded from this zone, favoring the British pound and initiating a new upward movement towards 1.2488–1.2508. A break below the 1.2363–1.2370 zone would increase the probability of a further decline towards the 23.6% retracement level at 1.2303.

The wave structure remains clear. The latest completed downward wave failed to break the previous low, while the last completed upward wave surpassed the previous peak. This suggests the formation of a bullish trend. However, recent waves vary significantly in size and allow for multiple interpretations. Therefore, I am not confident that we are currently in a sustained bullish trend that will last for at least a few weeks.

Thursday's fundamental backdrop offered no support for the British pound. Traders were expecting a dovish policy decision from the Bank of England, but it turned out to be even more dovish than anticipated. Additionally, Governor Andrew Bailey's speech lacked any positive sentiment.

Interest rates were cut by 0.25%, which was widely expected. However, all members of the Monetary Policy Committee (MPC) voted for the cut, rather than 7 or 8 members as forecasted. The BoE also downgraded its GDP growth projections for the next few years.

The UK economy has shown weak growth in recent years, and yesterday's forecasts indicated that growth would be even weaker than expected. Consequently, the strong sell-off in the pound was entirely justified.

Today, bullish traders might attempt a comeback if U.S. labor market and unemployment data come in weaker than expected. Given that the last Nonfarm Payrolls report was exceptionally strong, another print of 250,000–300,000 jobs seems unlikely, making softer numbers a real possibility.

On the 4-hour chart, the pair reversed in favor of the U.S. dollar, breaking below 1.2432. This signals the possibility of further downside towards the 100.0% Fibonacci level at 1.2299. A rebound above 1.2432 would indicate a continuation of the upward correction, particularly after the pound exits the downward trend channel. No divergences are forming across technical indicators at this time.

Commitments of Traders (COT) Report

The latest COT report shows that sentiment among Non-commercial traders has become even more bearish. Long positions decreased by 16,365 and short positions fell by only 2,950.

This means bullish traders have lost all market dominance, a process that has been unfolding for several months. The gap between long and short positions now favors bearish traders, with 59,000 long positions vs. 81,000 short positions.

I still expect further downside for GBP/USD, as professional traders continue reducing long positions and increasing short positions. Most bullish factors for the pound have already played out. While the current technical outlook suggests a rebound, corrective movements are still necessary.

News calendar for USA and UK:

• USA – Change in the number of employed Nonfarm Payrolls (13:30 UTC).
• USA – Unemployment rate (13:30 UTC).
• USA – Change in the average hourly wage (13:30 UTC).
• USA – University of Michigan Consumer Confidence Index (15:00 UTC).

Today's economic calendar features several major releases, making the fundamental backdrop highly influential on market sentiment.

GBP/USD Forecast & Trading Recommendations

Short positions were possible yesterday after the pair broke below 1.2488–1.2508, targeting 1.2363–1.2370, which was successfully reached. A rebound from this zone justified new long positions, targeting 1.2488–1.2508, which remain valid for today. A break below 1.2363–1.2370 would signal further downside towards 1.2303.

Fibonacci Levels

• Hourly Chart: Levels built from 1.3000 to 1.3432
• 4-Hour Chart: Levels built from 1.2299 to 1.3432