On the hourly chart, GBP/USD continued to rise on Friday within the horizontal range of 1.3177–1.3272. A rebound from the 1.3272 level would favor the US dollar and a resumption of the decline toward the 1.3164–1.3177 support level. Consolidation above the 100.0% retracement level at 1.3272 would open the way for the long-awaited advance in the British pound toward the 76.4% Fibonacci level at 1.3368.
The market situation remains entirely bearish. The latest completed upward wave failed to break above the previous peak, while the latest downward wave failed to break below the previous trough. Thus, bears continue to control the market. The FOMC's tighter monetary policy stance and the hawkish outlook conveyed by Kevin Warsh continue to support the US dollar. A reversal of the current trend is now possible only above 1.3284 or after two bullish waves have formed.
On Friday, the news background provided modest support for bulls, thanks to the weaker-than-expected University of Michigan Consumer Sentiment Index in the United States. However, this report is not considered a major release, so it attracted limited attention. The market has already shifted its focus to the US inflation report due on Wednesday. In my view, however, the Consumer Price Index no longer matters to traders as much as it did a few weeks ago.
First, the US dollar posted a monthly gain. This suggests that the market has already priced in the most hawkish potential outcome from the Federal Reserve. Second, the market has abandoned expectations of two monetary policy tightenings before the end of the year, while almost all FOMC members have indicated that one rate hike is necessary. Thus, in 2026, the Fed is virtually certain to raise rates once and virtually certain not to raise them twice. Therefore, the inflation report is no longer particularly important in terms of the remaining meetings of the US central bank. In my view, the British pound should rise this week because the factors supporting the US dollar have already been priced in. Accordingly, I expect GBP/USD to consolidate above 1.3272 and the pound to advance.
On the 4-hour chart, GBP/USD has begun moving back toward the 76.4% retracement level at 1.3277. A rebound from this level would favor a resumption of the decline toward the 100.0% Fibonacci level at 1.3159. Consolidation above 1.3277 would give the pound hope of a partial recovery. No indicator is showing an emerging divergence today. The technical picture on the hourly chart is currently more convincing, so I recommend focusing on that timeframe.
The sentiment of the "Non-commercial" trader category became even more bearish during the latest reporting week. The number of Long positions held by speculators increased by 3,863, while the number of Short positions rose by 10,399. The gap between Long and Short positions now stands at approximately 45,000 versus 143,000. The bears' advantage is widening again.
Previously, the bears' dominance was beyond question. However, that assessment is now less certain, as the news background has changed in recent months.
I still do not believe that the British pound is in a bearish trend. In the near term, however, everything will depend on Trump's trade policy, the monetary policies of the Federal Reserve and the Bank of England, and the duration, scale, and consequences of the war in the Middle East. In recent months, the market had adjusted its expectations toward peace, but negotiations between Iran and the United States collapsed before they had properly begun. It is also uncertain whether they will resume anytime soon.
The economic calendar for October 12 contains no significant releases. The economic news background is therefore unlikely to affect market sentiment on Monday.
Selling opportunities may arise today if the pair rebounds from 1.3272 on the hourly chart, with a target in the 1.3164–1.3177 level. Buying opportunities may arise if the pair closes above 1.3272, with a target of 1.3368.
The Fibonacci levels are drawn from 1.3272 to 1.3674 on the hourly chart and from 1.3158 to 1.3655 on the 4-hour chart.
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