On the hourly chart, the GBP/USD pair continued rising on Wednesday, ending the day near the 1.3425 level. Just a couple of weeks ago, there was no sign of another dollar sell-off, but trader optimism about a U.S.–China agreement quickly faded. The pound's upward move may continue toward the next Fibonacci retracement level of 161.8% – 1.3520.

The wave structure has become more complicated following the latest bullish offensive. The most recent upward wave broke above the previous high, while the last completed downward wave failed to break the previous low. This indicates that the "bearish" trend has turned "bullish." Bulls will find it difficult to rise further beyond 1.3425 without new headlines from Donald Trump about raising or introducing tariffs. However, bears have also shown only weakness and passivity in recent weeks.

Wednesday's news backdrop once again supported the bulls. The only report of the day—UK inflation—posted figures that gave traders little choice. I believe some traders had insider information, as the pound began rising even before the report's release, and the rally ended shortly after. Everything points to this data being priced in early. Perhaps many traders correctly anticipated a higher inflation reading. Or perhaps some had access to information not available to others. In any case, the pound rose again, while the dollar fell.

For a while, traders had cautiously supported the dollar, hoping the Geneva talks between U.S. and Chinese delegations would lead to broader negotiations and, ultimately, a trade agreement. But two weeks have passed, and there's been no update on those talks. Traders now question whether negotiations are happening at all and when a deal might be signed. Since recent developments have mostly pointed to worsening relations between the two countries, the market believes the tariff reductions were merely a stopgap to prevent a full trade shutdown. At this point, there's no indication of mutual understanding or real agreements.

On the 4-hour chart, the pair has returned to the 100.0% Fibonacci level at 1.3435. A new rebound from this level would favor the U.S. dollar and a pullback toward 1.3118. A consolidation above 1.3435 would allow for continued growth toward the next Fibonacci level of 127.2% – 1.3794. No emerging divergences are currently observed on any indicators.

Commitments of Traders (COT) Report:

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

In my view, the pound still faces downside risks, but recent events could prompt a longer-term market reversal. Over the past three months, long positions have risen from 65,000 to 92,000, while short positions have dropped from 76,000 to 62,000. Under Donald Trump, confidence in the dollar has weakened, and the COT reports show little appetite among traders to buy the greenback.

News Calendar for the U.S. and UK:

United Kingdom

• Services PMI (08:30 UTC)
• Manufacturing PMI (08:30 UTC)

United States

• Initial Jobless Claims (12:30 UTC)
• Services PMI (13:45 UTC)
• Manufacturing PMI (13:45 UTC)
• Existing Home Sales (14:00 UTC)

GBP/USD Forecast and Trader Tips:

Selling the pair is possible today if there is a bounce from the 1.3435 level on the 4-hour chart, with targets at 1.3344–1.3357 and 1.3205. Buying was previously viable on a close above the 1.3344–1.3357 zone, with a target of 1.3425. That target has been reached. New long positions are possible on a 4-hour close above 1.3435.

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