On the hourly chart, GBP/USD rose to the 100.0% retracement level at 1.3556 on Monday. A rebound from this level would favor the US dollar and a resumption of the decline toward 1.3526 and 1.3489. Consolidation above 1.3556 would allow for further growth toward the resistance level of 1.3633–1.3641.
The market situation remains bullish. The latest completed upward wave broke above the previous peak, while the new downward wave has not yet broken below the previous low. Thus, the bulls currently have the initiative in the market, and their advantage remains substantial. The bullish trend can be considered broken only after the low of the latest completed wave is broken. That is, below 1.3414. Alternatively, after two downward waves have formed.
There was no significant fundamental background on Monday. Trader activity was low, as no one wanted to force the issue ahead of a whole series of important events and reports. Let me remind you that several important indicators will be released in the US this week, which will either support Kevin Warsh's hawkish stance on Friday or refute it. The US dollar strengthened quite well at the end of last week, but this was mainly driven by traders' own optimism about the prospects for tighter FOMC monetary policy. Will these expectations be justified? The ISM business activity report, JOLTS and ADP labor-market reports, the Nonfarm Payrolls report, and the unemployment rate will provide answers to these questions. In my view, the prospects for tighter FOMC policy are not clear-cut. US inflation remains high, but the labor market, the economy, and the Treasury Department's problems with public debt and rising long-term Treasury yields must also be taken into account. The latter factor is also extremely important, as a Fed rate hike would lead to an even greater increase in bond yields. And the Treasury Department is currently unable to stop this process.
On the 4-hour chart, GBP/USD fell to the 23.6% retracement level at 1.3538. A rebound from this level would favor the pound and a resumption of growth within the upward trend channel toward the 0.0% retracement level at 1.3657. Consolidation below 1.3538 would allow for a further decline toward the 38.2% Fibonacci level at 1.3467. No new emerging divergences are currently observed.
Commitments of Traders (COT) report:
The sentiment of the Non-commercial trader category became less bearish over the latest reporting week. The number of Long positions held by speculators increased by 16,269, while the number of Short positions increased by 6,220. The gap between the numbers of Long and Short positions is currently approximately 93,000 versus 1.382 million. The gap and the bears' advantage are gradually narrowing; however, the bears' advantage remains substantial. Previously, the bears' dominance was unquestionable, but now it is, as the fundamental background has changed.
I still do not believe in a bearish trend for the pound, but in the near term, everything will depend on Trump's trade policy, the monetary policies of the Fed and the Bank of England, as well as the duration, scale, and consequences of the war in the Middle East. In recent months, the market has shifted toward expectations of peace, but negotiations between Iran and the US failed without really getting started. And there is no guarantee that they will resume in the near future. The Fed's monetary-policy stance remains contradictory.
News calendar for the US and the UK:
US – ISM Manufacturing PMI (14:00 UTC).US – JOLTS Job Openings (14:00 UTC).On September 1, the economic-events calendar contains two entries, among which the ISM index stands out as at least one significant release. The economic background may influence market sentiment in the second half of Tuesday.
GBP/USD forecast and trading tips:
Selling the pair was possible after consolidation below the 1.3633–1.3641 level on the hourly chart, with targets at 1.3556 and 1.3526. The targets were reached. New short positions can be considered after a rebound from 1.3556 or a close below 1.3526. Long positions can be considered today after a close above 1.3556, with a target of 1.3633–1.3641.
The Fibonacci grids are drawn from 1.3557–1.3272 on the hourly chart and from 1.3158–1.3655 on the 4-hour chart.