On the hourly chart, the GBP/USD pair continued its upward movement on Tuesday after bouncing off the 1.3139 level. Judging by the wave structure, the bearish trend has not been officially broken yet, but it's hanging by a thread. The growth may continue toward the resistance zone of 1.3344–1.3357. A rebound from this zone would favor the U.S. dollar, but in that case, the bearish trend would be considered violated. A breakout and consolidation above the 1.3344–1.3357 area would increase the likelihood of continued growth toward the next target at 1.3425.

The wave structure has remained simple and clear. The most recent upward wave did not surpass the previous high, while the last downward wave broke the previous low. Thus, the bullish trend has technically morphed into a bearish one. However, the pound's decline hasn't been strong enough to call it a full trend—over the past three months, such drops have been rare and shallow. Bulls will find it difficult to break above 1.3425 without fresh headlines from Donald Trump about new or increased tariffs. But bears aren't having an easy time either.

Tuesday's news flow completely erased the bears' efforts from Monday. Despite rising unemployment in the UK, bulls were on the offensive all day. While their movement was corrective in the first half of the day, the U.S. CPI report released in the second half dramatically changed the market's expectations for the Fed's monetary policy. After headline inflation dropped to 2.3% y/y and core inflation held at 2.8%, traders began demanding a rate cut from the Fed. Many likely concluded that Trump's tariffs aren't leading to runaway inflation, so there's no need for the Fed to maintain its hawkish stance.

However, in my view, inflation might still rise—but no one, not even Fed officials, can predict by how much. Therefore, the current bullish euphoria could be temporary.

On the 4-hour chart, the pair rebounded from the 100.0% Fibonacci level at 1.3435, reversed in favor of the U.S. dollar, and continued its decline toward the 76.4% corrective level at 1.3118. There are no emerging divergences in any indicators today. The ascending trend channel still indicates a bullish trend. Only a confirmed break below the channel would signal the potential for a sustained bearish move.

Commitments of Traders (COT) Report:

Speculative trader sentiment ("Non-commercial") turned more bullish in the latest reporting week. Long positions increased by 3,320 contracts, while short positions fell by 1,956. The net long position now stands at a 29,000-contract advantage (94,000 vs. 65,000), indicating growing confidence in the pound.

In my view, the pound still faces downside risks, but recent developments could push the market toward a longer-term reversal. Over the past three months, long positions have grown from 65,000 to 94,000, while shorts have decreased from 76,000 to 65,000. Under Donald Trump, faith in the U.S. dollar has faltered, and the COT data suggests traders lack strong conviction to buy the dollar.

Economic Calendar (UK & U.S.):

Wednesday contains no notable economic data releases. Therefore, news flow is unlikely to significantly affect trader sentiment during the rest of the day.

GBP/USD Forecast and Trade Recommendations:

Sell opportunities were available on the hourly chart after a close below the 1.3344–1.3357 zone and following two bounces from this area, with targets at 1.3265 and 1.3205 — both have been surpassed. Today, selling remains possible on a bounce from the 1.3344–1.3357 zone with targets at 1.3205 and 1.3139. Buy opportunities were valid after a confirmed breakout above 1.3205 on the hourly chart, targeting 1.3344 — which may still be achieved today.

Fibonacci Grids:

• Hourly chart: drawn from 1.3205 to 1.2695
• 4-hour chart: drawn from 1.3431 to 1.2104