On the hourly chart, the GBP/USD pair on Wednesday rebounded from the 1.3845 level, fell to the 161.8% corrective level at 1.3755, bounced off that level, and returned to 1.3845. Thus, the FOMC meeting did not help the bears. Today, another rebound from the 1.3845 level would once again work in favor of the U.S. dollar and lead to a moderate decline toward 1.3755. A firm break above 1.3845 would increase the probability of further growth toward the next Fibonacci level of 200.0% at 1.3931.
The wave situation remains "bullish." The most recent completed downward wave did not break the previous low, while the new upward wave broke the previous high. The news background for the British pound has been weak in recent months, but the news background in the U.S. has been even worse. Donald Trump regularly provides support to the bulls, which ensures growth of the British currency. A breakdown of the current trend can only be identified after two consecutive "bearish" waves.
The news background on Wednesday once again worked against the bears. Traders likely expected to hear hints from Jerome Powell about an interest rate cut, but did not get them. On the contrary, the Fed Chair stated that a rate cut is not required at the moment, and that the regulator has time to assess the effects of the three easings carried out last year. Powell also warned markets that a new "shutdown" in the U.S. economy could delay the resumption of the monetary easing cycle due to uncertainty in economic indicators. In my view, nothing "dovish" for the dollar was said last night; however, bullish traders launched a new attack. And here it is worth recalling that over the past week the U.S. dollar has fallen by 450 points, and losses of this magnitude were not related to the FOMC meeting or monetary policy prospects. The reason lies in Donald Trump's policies, as he practically threatens someone every day and makes radical decisions. Thus, perhaps the market simply ignored the FOMC meeting and is set for further selling of the U.S. dollar amid Trump's policies?
On the 4-hour chart, the pair rose to the Fibonacci level of 127.2% at 1.3795 and consolidated above it. Therefore, the growth process may continue toward the next level at 1.4020. A close below 1.3795 would favor the U.S. currency and lead to a moderate decline toward the support level of 1.3369–1.3435. No emerging divergences are observed today, but the RSI indicator is overbought, which may trigger a corrective pullback.
Commitments of Traders (COT) Report:
The sentiment of the "Non-commercial" trader category became more bullish over the last reporting week. The number of long positions held by speculators increased by 2,329, while the number of short positions decreased by 961. The gap between long and short positions is now effectively as follows: 81,000 versus 103,000, and it is shrinking rapidly. Bears have dominated in recent months, but it seems they have exhausted their potential. At the same time, the situation with euro currency contracts is directly opposite. I still do not believe in a "bearish" trend for the British pound.
In my opinion, the pound still looks less "dangerous" than the dollar. In the short term, the U.S. currency may enjoy periodic demand in the market, but not in the long term. Donald Trump's policies have led to a sharp deterioration in the labor market, and the Fed has been forced to ease monetary policy in order to halt the rise in unemployment and stimulate the creation of new jobs. U.S. military aggression also does not add optimism for dollar bulls.
News Calendar for the U.S. and the UK:
U.S. – Change in Initial Jobless Claims (13:30 UTC).
On January 29, the economic calendar contains only one entry that is of no interest. The impact of the news background on market sentiment on Thursday will be absent.
GBP/USD Forecast and Trader Advice:
Selling the pair was possible on a rebound from the 1.3845 level on the hourly chart, with targets at 1.3755 and 1.3620. The first target has been reached. New selling opportunities may arise on another rebound from 1.3845. Buying opportunities were available on a rebound from 1.3755, with targets at 1.3845 and 1.3931. The first target has been reached.
Fibonacci grids are constructed from 1.3470–1.3010 on the hourly chart and from 1.3431–1.2104 on the 4-hour chart.