The wave pattern is entirely clear. The last completed downward wave did not break below the previous low, while the latest upward wave surpassed the previous peak. This suggests that a bullish trend is still forming. However, technical analysis indicates that at least one more downward wave is expected. The pound has shown strong growth recently, but the trend may now shift to a bearish phase.

On Friday, the news flow was weak for both the pound and the dollar. Monday started with a slight rise as traders reacted to events in Washington from last week. However, the impact of the Trump-Zelensky dispute has faded, and traders are once again focusing on tariffs, U.S. foreign policy, and economic data.

This week, Trump may announce tariffs against the UK and the EU, which could support the dollar. Additionally, key economic releases such as PMI indices, ADP employment data, Nonfarm Payrolls, and the unemployment rate will be released. Today, the Manufacturing PMI for the UK and the U.S. will be in focus.

I believe that GBP/USD is likely to decline based on the current technical setup, but the news flow could cause fluctuations. This week, it will be crucial to track economic data closely to ensure that market movements align with technical analysis and signals.

On the 4-hour chart, the pair reversed in favor of the U.S. dollar after forming bearish divergence on both indicators. This suggests that the decline could continue toward the lower boundary of the upward trend channel. While this channel maintains bullish sentiment, there is no reason yet to assume a deep or prolonged decline. No new emerging divergences are observed in any indicators today.

Commitments of Traders (COT) Report

The Non-commercial trader sentiment in the latest COT report has become less bearish. The number of long positions held by speculators increased by 525, while short positions decreased by 4,517. Bulls have lost their advantage, but bears are not yet aggressively increasing their positions. The gap between long and short positions remains minimal: 74,000 vs. 69,000.

In my opinion, the pound still has room for further decline, and the COT reports indicate a slow and steady strengthening of bearish positions. Over the past three months, long positions have decreased from 120,000 to 74,000, while short positions have dropped from 75,000 to 69,000. I believe that professional traders will gradually reduce long positions or increase short ones, as all potential support factors for the pound have already been priced in. The pound received temporary support from strong UK economic data, but the technical outlook now favors a decline.

Economic Calendar: Key Events for the UK and U.S.

• UK – Manufacturing PMI (09:30 UTC)
• U.S. – Manufacturing PMI (14:45 UTC)
• U.S. – ISM Manufacturing PMI (15:00 UTC)

Monday's economic calendar includes three important U.S. releases, which could moderately impact market sentiment throughout the day.

GBP/USD Forecast and Trading Recommendations

Short positions are possible today if the pair rebounds from the 1.2611–1.2620 zone on the hourly chart, targeting 1.2538. Long positions are not recommended at this time, as bulls have been in control for an extended period and may need a pause.

Fibonacci levels:

• Hourly chart: 1.2809–1.2100
• 4-hour chart: 1.2299–1.3432