The wave situation still indicates the continuation of a bullish trend. The most recent completed upward wave broke the high of the previous wave, while the three new downward waves failed to reach a new low. Therefore, what we are seeing is not a trend reversal to bearish, but rather a series of waves within a strong correction – something traders haven't seen in a while. Bears still lack strong reasons to go on the offensive, as Trump's trade war continues and becomes harsher by the day.

Yesterday, the U.S. inflation report showed prices rising by 2.7% in June, 0.3% higher than the previous month. After this report, the dollar gained 70 points. This morning, the UK published its own inflation report showing a 3.6% rise in June – 0.2% higher than the previous month. While the U.S. report largely met trader expectations, the UK report exceeded forecasts by 0.2%. Thus, if yesterday the U.S. dollar strengthened based on expectations that the Fed will maintain current monetary policy settings at upcoming meetings, then today we should see an equally strong rise in the pound based on the same rationale. However, bulls are attacking very weakly this morning. It seems their strength has been exhausted after five consecutive months of rallying. Bears, meanwhile, have little informational support, but they sense the bulls' weakness and are attacking purely on enthusiasm. At the moment, the news background does not support the strengthening of the U.S. currency.

On the 4-hour chart, the pair turned in favor of the U.S. dollar, falling just a few points short of the 127.2% retracement level at 1.3795. Yesterday, the pair closed below the 100.0% Fibonacci level at 1.3435 and below the ascending trend channel. I remain cautious about declaring a bearish trend reversal, as there is very little positive news coming from the U.S. I can allow for a correction in the pair, but not a full-fledged bearish trend. Graphically, the decline could continue toward the next Fibonacci level at 76.4% – 1.3118.

Commitments of Traders (COT) Report:

Sentiment among the "Non-commercial" trader category became slightly less bullish over the past reporting week. The number of long positions held by speculators rose by 7,302, while short positions increased by 10,298. However, bears have long since lost their market advantage and stand little chance of success. The gap between long and short positions is 32,000 in favor of the bulls: 107,000 versus 75,000.

In my view, the pound still has room to fall, but the events of 2025 have fully shifted the market's long-term outlook. Over the past four months, the number of long positions has grown from 65,000 to 107,000, while short positions have decreased from 76,000 to 75,000. Under Donald Trump, faith in the dollar has eroded, and the COT reports show that traders have little desire to buy it. So regardless of the broader news context, the dollar continues to decline due to events surrounding Trump.

News Calendar for the U.S. and UK:

• UK – Consumer Price Index (06:00 UTC)
• U.S. – Producer Price Index (12:30 UTC)
• U.S. – Industrial Production Change (13:15 UTC)

On Wednesday, the economic calendar contains three key events, the most important of which has already been released to traders. The impact of the news background on trader sentiment for the rest of the day is expected to be limited.

GBP/USD Forecast and Trader Recommendations:

I do not recommend opening new sell positions today, as the dollar has already overextended its rally. Buy positions can be considered either after a bounce from the 1.3357–1.3371 zone or after a close above 1.3425, targeting 1.3470 and 1.3530.

The Fibonacci level grids are drawn from 1.3371–1.3787 on the hourly chart and from 1.3431–1.2104 on the 4-hour chart.