On the hourly chart, the GBP/USD pair continued its decline on Friday toward the 1.3425 level after closing below the 76.4% retracement level at 1.3470. Today, a firm move below 1.3425 would signal the potential for further decline toward the support zone of 1.3357–1.3371. A rebound from the 1.3425 level would favor the British pound and a possible rise toward 1.3470.

The wave pattern has shifted in favor of the bulls, as expected. Several downward waves were previously formed, each breaking the low of the previous one. Currently, the latest upward wave has broken the highs of the two preceding waves, effectively ending not just a bearish trend, but even the corrective pullback. Based on the wave structure, I expect the pair to rise in the near term. However, the news background is starting to shift in favor of the bears, which may allow them to continue their pressure.

The news flow on Friday was rather limited, but the UK did release a retail sales report, and the U.S. published data on durable goods orders. I don't believe these reports were the main trigger for the bears' renewed push. A more likely reason lies in the conclusion of several key agreements, particularly between the U.S. and the EU, as well as between the U.S. and China. As a reminder, Washington and Brussels signed a trade deal on Sunday that, in my view, is far more favorable to the U.S. than to Europe. That is a significant factor supporting the dollar. Also on Sunday, it was reported that Beijing and Washington may extend the current "trade truce," which involves reduced tariffs for the duration of negotiations on a final deal. While the extension has not yet been officially announced, many traders and analysts believe it will happen. As a result, at the start of the new week, bears are receiving fundamental support and may continue their offensive.

On the 4-hour chart, the pair is still generally in a downward trend, but after forming a bullish divergence, it reversed in favor of the pound and rebounded from the support zone of 1.3378–1.3435. At the moment, the price has returned to this zone, so another rebound could signal further gains toward 1.3795. A firm move below 1.3378–1.3435 would increase the likelihood of a continued decline toward the 76.4% Fibonacci level at 1.3118.

Commitments of Traders (COT) Report:

Sentiment among the "Non-commercial" category of traders became significantly less bullish over the last reporting week. The number of long positions held by speculators fell by 7,220, while short positions increased by 21,401. Bears have suddenly gained momentum, possibly due to the increased appeal of the dollar following Washington's major trade agreements. The gap between long and short positions is now essentially zero: 93,000 versus 93,000.

In my view, the British pound still faces downside risks. The fundamental backdrop in the first six months of the year was extremely negative for the U.S. dollar, but is now slowly shifting in a more favorable direction. Trade tensions are easing, key deals are being signed, and the U.S. economy is set to recover in the second quarter thanks to tariffs and various investments.

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

There are no noteworthy economic events scheduled for Monday. The news background is unlikely to influence trader sentiment for the remainder of the day.

GBP/USD Forecast and Trading Tips:

Selling the pair will become relevant if it closes below the 1.3425 level on the hourly chart. However, there is a strong support zone at 1.3378–1.3435 on the 4-hour chart, so I would wait for a firm break below that area. Buying opportunities may arise on a rebound from the 1.3378–1.3435 zone on the 4-hour chart, as such a move would indicate bear weakness, even with fundamental support favoring the dollar.

Fibonacci grids are built from 1.3371 to 1.3787 on the hourly chart and from 1.3431 to 1.2104 on the 4-hour chart.