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19.12.2024 12:29 PM
peak of the previous wave, while the latest downward wave broke the previous low. As a result, the "bullish" trend can now be considered over. The current upward wave must not exceed the peak of December 17; otherwise, the "bearish" trend could end prematurely, even before starting. The pound's rapid recovery raises concerns about this movement.
Wednesday's drop in the pound was primarily driven by the Federal Open Market Committee (FOMC) meeting. Although the Fed eased its monetary policy, traders largely ignored this development as it had already been priced into the market well before the meeting. Instead, news of only two rate cuts expected next year, alongside continued U.S. economic growth, spurred dollar bulls into action. This led to a justified rally in the U.S. dollar.
Later today, the outcome of the Bank of England's meeting will be announced. In my opinion, surprises are possible. The question is what type and nature they will take. Traders are not expecting a rate cut from the Bank of England. If rates remain unchanged, attention will shift to the voting results of the Monetary Policy Committee (MPC) and the central bank's accompanying statement. This could include new forecasts for inflation and GDP, providing clues about the Bank of England's plans for the coming year. It's worth noting that yesterday's surge in the dollar was driven largely by market expectations surrounding 2025. Thus, I anticipate significant volatility in the pair within a few hours, with conclusions likely to become clearer by the evening.
On the 4-hour chart, the pair reversed in favor of the U.S. dollar, declining to the corrective level of 76.4% – 1.2565. The rebound from this level has already worked in favor of the pound, which is rapidly recovering toward the Fibonacci level of 61.8% – 1.2728, the point from which yesterday's decline began. The situation remains unclear, but the Bank of England's decision is expected to clarify market reactions and provide a basis for conclusions.
The sentiment among Non-commercial traders remained largely unchanged over the last reporting week. The number of long positions held by speculators increased by 4,707, while short positions decreased by 3,092. Bulls still hold the advantage, but this dominance has been steadily eroding in recent months. The gap between long and short positions is now only 27,000: 102,000 vs. 75,000.
In my view, the pound continues to face downward risks, as the COT data indicates a strengthening position for bears nearly every week. Over the past three months, the number of long positions has decreased from 160,000 to 102,000, while short positions have risen from 52,000 to 75,000. I believe that professional players will likely continue reducing long positions or increasing shorts over time, as most bullish factors for the pound have already been priced in. Graphical analysis further supports a bearish outlook for the pound.
Thursday's economic calendar includes five notable events, with a primary focus on the UK data. The impact of these events on market sentiment could again be significant for the remainder of the day.
Selling the pair was possible following a rebound from the 1.2709–1.2734 zone on the hourly chart, targeting 1.2611–1.2620, which were achieved with some margin. Buying opportunities could have been considered at a rebound from 1.2569 on the hourly chart. However, the trend has now shifted to bearish, and the pound may drop again today.
The Fibonacci levels are constructed from 1.3000 to 1.3432 on the hourly chart and from 1.2299 to 1.3432 on the 4-hour chart.
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