In my morning forecast, I highlighted the 1.2462 level as a key point for making trading decisions. Looking at the 5-minute chart, the rise and subsequent false breakout around 1.2462 provided a solid entry point for short positions, leading to a nearly 30-point decline. The technical outlook for the second half of the day remains unchanged.

Opening Long Positions on GBP/USD:

As seen on the chart, there was no significant demand for the pound above 1.2460, despite the continuation of yesterday's trend. Understandably, traders are hesitant to take positions ahead of key economic data, which could significantly shift market sentiment. If the U.S. Consumer Price Index (CPI) rises, selling pressure will return to the pair, leading to a substantial decline in GBP/USD. Conversely, if inflation data comes in lower than expected, the pound's growth will be almost certain, as Powell's recent comments about waiting to cut rates will lose their impact.

If the pair declines, I will consider long positions only after a false breakout near the 1.2418 support level, targeting a rise toward 1.2462, which has yet to be broken. A breakout and retest of this range from above will provide a new entry point for long positions, aiming for an update of 1.2505, which would restore bullish momentum for the pound. The most ambitious target will be 1.2545, where I plan to take profit.

If GBP/USD declines and there is no bullish activity around 1.2418 in the second half of the day, selling pressure will return, giving sellers the opportunity to erase all of yesterday's gains. In this case, I will consider long positions only after a false breakout at the 1.2375 low. I will also look for buying opportunities on an immediate rebound from 1.2332, targeting a 30-35 point intraday correction.

Opening Short Positions on GBP/USD:

Sellers attempted to push the pound lower, but a larger move down did not materialize. If GBP/USD rises after the inflation data and Jerome Powell's speech, I will continue to focus on resistance at 1.2462. A false breakout at this level, similar to the earlier setup, will provide an entry point for short positions, targeting a decline to 1.2418, where the moving averages—favoring bulls—are located.

A breakout and retest of 1.2418 from below will trigger stop-loss orders, opening the way for a drop to 1.2375. The final downward target will be 1.2332, where I plan to take profit.

If demand for the pound remains strong in the second half of the day following lower U.S. inflation data, and sellers fail to hold 1.2462, the pair will continue its upward move. In this scenario, I will postpone short positions until the next resistance at 1.2505, where I will sell only after a failed breakout. If GBP/USD fails to decline from there, I will look for short positions on an immediate rebound from 1.2545, targeting a 30-35 pip correction.

Commitments of Traders (COT) Report:

The COT report from February 4 showed a decrease in short positions and an increase in long positions. However, do not rush to assume the pound will continue rising. This report does not yet account for the Bank of England's decision to cut interest rates and adopt a significantly more dovish stance. The recent pound rally was merely a correction, while the primary bearish pressure remains, particularly as new measures from the White House continue to weigh on risk assets and sustain demand for the dollar.

According to the latest COT report:

• Long non-commercial positions increased by 6,111 to 65,442
• Short non-commercial positions decreased by 4,238 to 76,765
• The gap between long and short positions narrowed by 356

Indicator Signals

Moving AveragesTrading remains above the 30- and 50-day moving averages, signaling further pound gains.

Note: The moving average periods and prices discussed are based on the hourly (H1) chart and may differ from the traditional daily (D1) moving averages.

Bollinger BandsIf the pair declines, the lower Bollinger Band around 1.2418 will act as support.

Indicator Descriptions:

• Moving Average (MA): Identifies the current trend by smoothing out volatility and noise.
  • 50-period MA (yellow line on the chart)
  • 30-period MA (green line on the chart)
• MACD (Moving Average Convergence/Divergence):
  • Fast EMA: 12-period
  • Slow EMA: 26-period
  • Signal Line (SMA): 9-period
• Bollinger Bands: 20-period
• Non-commercial traders: Speculators such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes.
• Long non-commercial positions: The total long open interest held by non-commercial traders.
• Short non-commercial positions: The total short open interest held by non-commercial traders.
• Net non-commercial position: The difference between non-commercial short and long positions.