On the hourly chart, the GBP/USD pair on Wednesday rebounded from the resistance level of 1.2709 and reversed in favor of the US dollar, continuing its decline toward the support zone of 1.2611–1.2620. A rebound from this zone could favor the British pound and push it back to 1.2709, as the past 5-6 days' movement has been largely horizontal. A close below the 1.2611-1.2620 zone would likely extend the "bearish" move toward 1.2570 and 1.2517.

The wave situation is straightforward. The last completed upward wave failed to surpass the peak of the previous wave, while the most recent downward wave (still forming) has broken through the two previous lows. This indicates the continuation of the "bearish" trend. For any signs of a "bearish" trend reversal, the pair would need to return to the 1.3000 level and close above the last peak.

On Wednesday, the UK inflation report was crucial, yet bulls once again showed their weakness. Despite UK inflation rising more than expected, bulls couldn't break through the 1.2709 level, which was already within reach when the report was released. The subsequent decline could mark the start of a new "bearish" trend on the hourly chart. Rising inflation typically signals a more "hawkish" Bank of England stance, implying slower rate cuts. However, bulls failed to take advantage of this. With no significant news for the rest of the week, a sideways movement is the most logical outcome. Still, traders should closely monitor the lower range boundaries, as a close below them could trigger renewed bearish momentum.

The pair has dropped to the 1.2620 level. A rebound and subsequent rise from this level are unlikely. A close below 1.2620 would increase the likelihood of further declines toward the 76.4% corrective level at 1.2565. Regularly forming "bullish" divergences currently hold little significance for traders.

Commitments of Traders (COT) Report

The sentiment among "Non-commercial" traders turned more "bullish" in the last reporting week. Long positions decreased by 745, while short positions dropped by 11,711. Bulls maintain a significant edge, with a 56,000-contract gap between long (120,000) and short (64,000) positions.

Despite this, I believe the outlook for the pound remains bearish. Over the past three months, long positions rose from 102,000 to 120,000, while short positions increased from 55,000 to 64,000. Institutional traders are likely to continue reducing long positions or adding shorts, as most bullish factors for the pound have already been priced in. Graphical analysis also supports a bearish outlook.

Economic Calendar for the US and UK

• US: Initial Jobless Claims Change (13:30 UTC)
• US: Philadelphia Fed Manufacturing Index (13:30 UTC)
• US: Existing Home Sales (13:30 UTC)

Thursday's economic calendar features several less significant events. The information backdrop's impact on trader sentiment is expected to remain weak.

GBP/USD Forecast and Trading Recommendations

Selling the pair was possible after a rebound from 1.3044 on the 4-hour chart, with a target of 1.2931. This target has been reached twice. Subsequent targets at 1.2931, 1.2892, 1.2788–1.2801, 1.2752, and 1.2611–1.2620 have also been met. A close below the 1.2611–1.2620 zone allows holding short positions toward 1.2570 and 1.2517. Selling after a rebound from 1.2709–1.2434 is also viable. I would not recommend buying the pair in a "bearish" trend.

Fibonacci levels are plotted from 1.3000–1.3432 on the hourly chart and 1.2299–1.3432 on the 4-hour chart.