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27.01.2025 01:03 PM
Forecast for GBP/USD on January 27, 2025

On the hourly chart, GBP/USD closed above the resistance zone of 1.2363–1.2370 on Friday and rose toward the resistance zone of 1.2488–1.2508. A rebound from this zone worked in favor of the U.S. dollar, initiating a new decline toward the 1.2363–1.2370 zone. The upward trend channel continues to indicate a bullish market sentiment. The pound is maximizing its growth opportunities.

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The situation with the waves is quite clear. The last completed downward wave broke the low of the previous wave, while the most recent upward wave has not yet approached the previous peak. Thus, a bearish trend is still forming, and there is no doubt about this. For this trend to reverse, the pound must rise to at least the 1.2569 level and close confidently above it. While this is possible, discrepancies between the euro and the pound waves exist, meaning one of the structures is likely to be invalidated.

Friday's news from the UK wasn't particularly positive, consistent with the overall tone of January. Business activity indices showed slight growth, but it's unlikely these figures triggered such a strong bullish move. More likely, it is the U.S. dollar bears (bulls for GBP/USD) who remain cautious of Donald Trump and his decisions.

However, this week, the dollar will have opportunities to recover. The upcoming Federal Reserve (Fed) meeting is expected to be hawkish, as the regulator does not plan to ease monetary policy. While the market may be selling the dollar due to Trump, this factor is vague and unlikely to consistently pressure the U.S. currency.

In my opinion, the upcoming meetings of the Bank of England (BoE) and the Fed, along with statements from Jerome Powell and Andrew Bailey, will play a more significant role over the next two weeks. If traders sense Trump's limited influence on the Fed, dollar bears may launch a strong offensive. Of course, this must be confirmed by graphical signals.

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4-Hour Chart Analysis:

The pair continues to rise within a downward trend channel. A rebound from the channel's upper boundary could trigger a reversal in favor of the U.S. dollar and initiate a decline toward at least the Fibonacci level of 100.0% at 1.2299. If the pair consolidates above the channel, it could push bears out of the market entirely. However, for bulls to sustain momentum, continuous positive news from the UK or negative news from the U.S. will be necessary—an unlikely scenario at the moment. No divergences are observed in any indicators today.

Commitments of Traders (COT) Report:

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The sentiment of the "Non-commercial" category of traders became significantly more bearish in the last reporting week. The number of long positions held by speculators decreased by 4,861, while short positions grew by 3,834. Bulls have lost their advantage on the market—a process that has been ongoing for several months. The gap between long and short positions now favors the bears: 75,000 versus 84,000.

In my view, the pound still has downward potential, and the COT reports indicate a strengthening of bearish positions nearly every week. Over the past three months, the number of long positions has dropped from 161,000 to 75,000, while the number of short positions has increased from 67,000 to 84,000. I believe professional players will continue to reduce long positions or increase short positions over time, as all possible factors for buying the British pound have already been priced in.

Graphical analysis currently signals growth, but corrections should also be expected.

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

On Monday, the economic calendar does not feature any significant events. As such, the information background will not influence trader sentiment for the rest of the day.

GBP/USD Forecast and Recommendations for Traders:

  • Sales: Consider selling the pair if it consolidates below the upward trend channel on the hourly chart. Sales were also possible after a rebound from the 1.2488–1.2508 level, but the local trend remains bullish.
  • Purchases: Buying the pound is possible today after a rebound from the 1.2363–1.2370 zone on the hourly chart, targeting 1.2488–1.2508.

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

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