On the hourly chart, the GBP/USD pair showed a sharp rise on Friday toward the resistance level of 1.3354–1.3357, followed by a rebound, a reversal in favor of the U.S. dollar, and an equally sharp decline. Today, a rebound from the 23.6% Fibonacci level at 1.3313 suggests a potential new upward movement toward the 1.3354–1.3357 level. A consolidation of the pair below 1.3313 would favor the dollar and signal a continuation of the fall toward the next corrective level of 0.0% – 1.3247.

The wave structure remains bullish. The last completed upward wave broke the previous high, while the most recent downward wave did not break the prior low. The news background in recent weeks has been negative for the U.S. dollar, but bullish traders have not taken advantage of the opportunities presented. They are now starting to spread their wings, though very slowly and without much confidence.

On Friday, a new batch of U.K. economic data was released, which could have encouraged the bulls and given them the strength to push higher. Business activity indices in both the services and manufacturing sectors, along with retail sales volumes, turned out better than traders had expected. However, the bulls only gained real momentum from the U.S. inflation report, which further increased the likelihood of monetary policy easing by the Federal Reserve at its October and December meetings. Inflation in the U.S. is growing at a slow pace, allowing the regulator to focus temporarily on the labor market. In my view, even without the inflation report, the dollar has no strong advantages at the moment. Therefore, I continue to expect the bulls to advance. Still, on that same Friday, they again demonstrated weakness—retreating meekly right after the inflation data was released.

At present, the bulls have very little fuel left, even though the information background continues to support them. It's also worth noting the rather weak University of Michigan Consumer Sentiment Index, which has been declining for several consecutive months. American consumers continue to downgrade their expectations, as the trade war drags on and the government shutdown persists.

On the 4-hour chart, the pair reversed in favor of the pound after forming a bullish divergence on the CCI indicator and then rose to the 100.0% corrective level at 1.3435. A rebound from this level worked in favor of the U.S. currency, leading to a decline toward 1.3339, where the pair has been trading for over a week. No new emerging divergences are observed on any indicator. For now, more attention should be given to the hourly chart for analysis.

Commitments of Traders (COT) Report:

The sentiment among the Non-commercial category became more bullish in the most recent reporting week — although that data is already a month old. The number of long positions held by speculators increased by 3,704, while short positions decreased by 912. The current gap between longs and shorts is roughly 85,000 vs. 86,000, meaning bullish traders are once again tipping the scales slightly in their favor.

In my opinion, the pound still faces downward risks, but with each passing month, the U.S. dollar looks weaker and weaker. If earlier traders worried about Donald Trump's protectionist policies without fully understanding their consequences, now they are beginning to fear the results of those policies: the risk of a potential recession, the continuous introduction of new tariffs, and Trump's conflict with the Federal Reserve — which could make the regulator "politically influenced." Thus, the pound currently looks far less risky than the U.S. currency.

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

For October 27, the economic calendar contains no notable events. Therefore, the news background will not affect market sentiment on Monday.

GBP/USD Forecast and Trading Recommendations:

Sell positions may be considered on a rebound from the 1.3354–1.3357 level on the hourly chart, with targets at 1.3313 and 1.3247. Buy positions could be considered on a rebound from 1.3313, with targets at 1.3354 and 1.3387.

Fibonacci levels are drawn between 1.3526–1.3247 on the hourly chart and 1.3431–1.2104 on the 4-hour chart.