On the hourly chart, the GBP/USD pair on Friday rebounded from the support level of 1.3595–1.3620, reversed in favor of the pound, and began rising toward the 161.8% Fibonacci retracement level at 1.3755. A consolidation below the 1.3595–1.3620 level would favor the U.S. dollar and signal a continuation of the decline toward the support level of 1.3526–1.3539.

The wave structure remains "bearish." The last completed downward wave broke the previous low, while the last upward wave failed to break the previous high. To shift the trend back to "bullish," the pair needs to consolidate above the latest peak at 1.3730 or form two consecutive bullish waves. The news background for the pound has been weak in recent months, but the U.S. information backdrop has also rarely given traders real reasons for optimism. Bulls regularly receive support from Donald Trump and weakness in the U.S. labor market.

On Friday, the news backdrop seemed to open every door for the bulls. However, instead of taking advantage of these opportunities, the bulls failed to act on them. U.S. consumer price index data for January slowed to 2.4% year-over-year, which was even lower than traders expected. Only 0.4% remains to reach the Federal Reserve's target level. Inflation in the U.S. has been slowing for five consecutive months, indicating a trend rather than a one-time occurrence. Thus, in the coming months, inflation may reach the long-awaited 2% mark. By that time, however, the Federal Reserve's interest rate should be much lower than the current 3.75%; otherwise, inflation could continue slowing further. Members of the FOMC cannot fail to understand this. Therefore, in my view, the Fed may decide to resume monetary easing at its next meeting—especially if the next inflation report (for February) shows even further slowing. Strangely, the market currently does not believe in a March easing, expecting the next rate cut no earlier than summer, and traders' reaction to the inflation data was virtually nonexistent. In the case of the pound, only the technical zone of 1.3595–1.3620 prevented further declines. However, I would prefer to see a new, justified upward move rather than merely a pause in the decline.

On the 4-hour chart, the pair rebounded from the 127.2% Fibonacci level at 1.3795 and has since continued declining toward the support level of 1.3369–1.3435. The bearish trend on the hourly chart has not yet been completed. A consolidation above 1.3795 would allow expectations for a continuation of the bullish trend toward 1.4020. No emerging divergences are currently observed on any indicators.

Commitments of Traders (COT) Report:

Sentiment among the "Non-commercial" category of traders became slightly less bullish over the latest reporting week. The number of long positions held by speculators decreased by 6,520, while short positions increased by 5,379. The gap between long and short positions now stands at approximately 88,000 versus 114,000, and is narrowing overall. In recent months, bears have dominated, but they seem to have exhausted their potential. At the same time, the situation with euro contracts is directly opposite. I still do not believe in a sustained bearish trend for the pound under any circumstances.

In my view, the pound still looks less "dangerous" than the dollar, and that is its main advantage. In the short term, the U.S. currency may occasionally find demand in the market—but not in the long term. Donald Trump's policies have led to a sharp decline in the labor market, and the Federal Reserve is forced to pursue monetary easing to stimulate job creation. U.S. military aggression also does little to inspire optimism among dollar bulls.

News Calendar for the U.S. and the U.K.:

On February 16, the economic calendar contains no notable events. The news background will have no impact on market sentiment on Monday.

GBP/USD Forecast and Trading Tips:

Selling the pair is possible upon consolidation below the 1.3595–1.3620 level on the hourly chart, with a target of 1.3526–1.3539. Buying opportunities arose after a rebound from the 1.3595–1.3620 level on the hourly chart, targeting 1.3755. These positions can still be held today and in the coming days.

Fibonacci retracement grids are drawn from 1.3470–1.3010 on the hourly chart and from 1.3431–1.2104 on the 4-hour chart.