On the hourly chart, the GBP/USD pair easily broke above the 1.2709 level on Tuesday and continued its upward movement. On Wednesday morning, the pair is trading near the 1.2788–1.2801 resistance zone. A rebound from this area could signal a reversal in favor of the U.S. dollar, leading to a decline towards 1.2709. On the other hand, a breakout above this zone and the 100.0% Fibonacci level at 1.2810 would increase the likelihood of further growth toward 1.2931.

The wave structure is clear. The last completed downward wave did not break the previous low, while the new upward wave surpassed the last peak. This suggests that the formation of a bullish trend continues. The pound has shown strong gains recently—perhaps too strong, given that the fundamental backdrop is not particularly supportive of relentless bullish action.

There was no major economic data from the UK or the U.S. on Tuesday, except for Donald Trump's speech. The U.S. president once again spoke about tariffs and a potential natural resource deal with Ukraine, which, according to him, could be signed soon. However, market participants are not finding anything positive in Trump's ambitions to "Make America Great Again." Instead, they see the risk of a shrinking U.S. economy—something that has not happened since the COVID-19 crisis. As a result, Trump could lead the U.S. into a recession within his first few months in office, prompting the FOMC to consider more aggressive monetary easing than the market anticipates.

Today, traders should closely follow the speech of Bank of England Governor Andrew Bailey, as he may address tariffs, the economy, inflation, and GDP growth. Market participants will be looking for any indications regarding potential interest rate cuts by the BoE in 2025. While the pound remains firmly bullish, Trump cannot impose new tariffs every day.

On the 4-Hour Chart, the pair briefly reversed in favor of the U.S. dollar following a bearish divergence in both indicators, but the decline was short-lived. A bounce from the 76.4% Fibonacci level at 1.2565 favored the pound, triggering renewed growth towards the 50.0% correction level at 1.2861. A significant drop in GBP/USD is unlikely unless the pair closes below the ascending channel. No new divergences are forming in any indicators as of today.

Commitments of Traders (COT) Report

The Non-Commercial category of traders has become less bearish over the past reporting week. Long positions increased by 525 contracts, while short positions decreased by 4,517 contracts. Bulls have lost some dominance, but bears have yet to gain traction either. The gap between long and short positions remains narrow at 74,000 vs. 69,000.

The outlook for the pound remains bearish, and the COT reports indicate a gradual strengthening of bearish positions. Over the last three months, long positions have dropped from 120,000 to 74,000, while short positions have declined from 75,000 to 69,000. In the long run, institutional traders may continue unwinding long positions or increasing shorts, as all major bullish catalysts for GBP have already played out. Temporary support for the pound has come from positive UK economic data, but the technical outlook still signals potential downside risks.

Economic Calendar – UK & U.S.

• UK – Services PMI (09:30 UTC)
• U.S. – ADP Employment Change (13:15 UTC)
• UK – BoE Governor Andrew Bailey Speech (14:30 UTC)
• U.S. – Services PMI (14:45 UTC)
• U.S. – ISM Services PMI (15:00 UTC)

Wednesday's economic calendar is packed with five key events, meaning that market sentiment will be heavily influenced by fundamental developments throughout the day.

Trading Recommendations for GBP/USD

Short positions can be considered if the pair rebounds from the 1.2788–1.2801 resistance zone, with a downward target at 1.2709. Long positions are not recommended for now, as the pound's rally has been extended, and its recent strength appears questionable. However, a breakout above the 1.2788–1.2801 zone could push GBP/USD toward 1.2931.

Fibonacci Levels

• Hourly Chart: 1.2809–1.2100
• 4-Hour Chart: 1.2299–1.3432