On the hourly chart, the GBP/USD pair on Monday reversed in favor of the British pound and consolidated above the resistance zone of 1.3344–1.3357, which had previously posed serious difficulties for the bulls. Thus, the upward movement may continue toward the 1.3425 level. A consolidation below the 1.3344–1.3357 zone would favor the U.S. dollar and a slight decline toward the 100.0% Fibonacci level at 1.3205.

The wave situation became more complicated after the latest bull offensive. The most recent completed upward wave broke above the previous wave's high, while the most recent completed downward wave failed to break the previous low. Thus, the "bearish" trend is beginning to shift into a "bullish" one. It will be difficult for the bulls to rise above the 1.3425 level without new statements from Donald Trump about raising or introducing tariffs on imports. However, the bears are also struggling, as recent days and weeks have shown.

There was no significant news background on Monday, but the market still managed to find a few developments in the information flow that could be used—if desired—to sell the dollar. The first was the news that the FOMC had begun increasing its purchases of U.S. Treasury bonds. Volumes remain relatively low, and there is no talk yet of launching a full-scale QE program. Recall that QE (Quantitative Easing) is a form of monetary policy easing, which is impractical when Fed interest rates are high. However, an increase in bond purchases is still a "dovish" step by the regulator.

The second piece of news was the downgrade of the U.S. credit rating by Moody's, which, personally, I don't see as anything particularly special or unusual—certainly not enough to justify a sharp bullish surge. Given Trump's actions, the economic downturn, market turbulence, and rising Treasury yields, the downgrade was logical. The U.S. economy currently faces more serious issues than its credit rating.

On the 4-hour chart, the pair bounced off the 100.0% Fibonacci level at 1.3435, but the decline halted near the 76.4% retracement level at 1.3118. At the moment, the pair has almost returned to the 1.3435 level. A new rebound from this level would again favor the U.S. dollar and some decline toward 1.3118. If the pair consolidates above 1.3435, it could indicate further growth toward the next Fibonacci level at 127.2% – 1.3794. No emerging divergences are observed today on any indicators.

Commitments of Traders (COT) Report:

Sentiment among the "Non-commercial" trader category became slightly less bullish over the last reporting week. The number of long positions held by speculators fell by 4,844, while short positions decreased by 2,825. Bears have long lost their advantage in the market. The gap between the number of long and short positions now stands at 27,000 in favor of the bulls: 89,000 vs. 62,000.

In my view, the British pound still has room for decline, but recent developments may push the market to reverse in the long term. Over the past three months, the number of long positions has increased from 65,000 to 92,000, while the number of short positions has dropped from 76,000 to 62,000. Under Donald Trump, confidence in the dollar has weakened, and COT reports show that traders have little appetite to buy the dollar.

News Calendar for the U.S. and the UK:

On Tuesday, the economic calendar contains no entries. Therefore, the news background will not influence trader sentiment for the rest of the day.

GBP/USD Forecast and Trading Advice:

Selling the pair is possible today if the hourly close is below the 1.3344–1.3357 zone, with targets at 1.3265 and 1.3205. Buying was possible on a close above the 1.3344–1.3357 zone, with a target of 1.3425. These positions can now be held open.

Fibonacci levels are drawn from 1.3205 to 1.2695 on the hourly chart and from 1.3431 to 1.2104 on the 4-hour chart.