On the hourly chart, GBP/USD rebounded twice on Thursday from the 50.0% retracement level at 1.3404, reversed in favor of the US dollar, and began declining toward the 38.2% retracement level at 1.3342. A consolidation above 1.3404 would favor the pound and a resumption of growth toward the 1.3454–1.3469 resistance level.

The market situation has turned bullish. The latest completed downward wave broke below the previous low, but the new upward wave has also broken above the previous high. Thus, bulls have temporarily taken the initiative. The FOMC's tighter monetary policy stance and the hawkish outlook conveyed by Kevin Warsh supported the dollar for a month. Perhaps the time has now come for a bullish advance.

There was no significant fundamental news on Thursday. As a result, traders shifted their attention to the chart pattern and key levels. Two rejections at 1.3404 determined the pound's direction toward the end of the current week. Bulls had been the only ones applying upward pressure since last Wednesday, but the time now appears to have come for a corrective pullback. This morning, the UK released its retail sales report, which showed that sales volumes fell by 0.4% in September compared with August. Traders had expected a decline of just 0.1% month over month. Later, the UK will also release its September business activity indices, which could strengthen the bears' position on Friday. However, the economic data released today are unlikely to shift market sentiment back to bearish. At its next meeting, the Bank of England will probably move toward tighter monetary policy, as inflation continues to accelerate and further delays are no longer an option. Therefore, in the near term, only a corrective pullback should be expected.

On the 4-hour chart, GBP/USD rose to the 50.0% retracement level at 1.3409. A rejection at this level would favor the US dollar and a decline toward the 61.8% Fibonacci level at 1.3348. Consolidation above 1.3409 would increase the likelihood of further growth toward the 1.3467–1.3482 resistance level. No emerging divergences are currently visible on any of the indicators.

Commitments of Traders (COT) Report:

Sentiment among the Non-commercial trader category became even more bearish over the latest reporting week. The number of Long positions held by speculators decreased by 1,074, while the number of Short positions increased by 8,279. The gap between Long and Short positions currently stands at approximately 44,000 versus 151,000, respectively. The bears' advantage is growing again. Previously, the bears' dominance was unquestionable, but it is now open to question because the fundamental backdrop has changed in recent months.

The bearish trend in the pound remains unconvincing. 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 failed before they had properly begun. There is also no guarantee that the talks will resume in the near future.

Economic Calendar for the United States and the United Kingdom:

• United Kingdom – Retail Sales (06:00 UTC).
• United Kingdom – Services Purchasing Managers' Index (08:30 UTC).
• United Kingdom – Manufacturing Purchasing Managers' Index (08:30 UTC).
• United States – Services Purchasing Managers' Index (13:45 UTC).
• United States – Manufacturing Purchasing Managers' Index (13:45 UTC).

On October 23, the economic calendar contains five entries, with the UK releases being the most noteworthy. Economic data may influence market sentiment during the first half of Friday's trading session.

GBP/USD Forecast and Trading Recommendations:

Selling opportunities arose after the pair was rejected at 1.3404 on the hourly chart, with a target of 1.3342. These trades can remain open today. Buying opportunities may arise if the hourly chart closes above 1.3404, with a target of 1.3454–1.3469, or if the pair rebounds from 1.3342, with a target of 1.3404.

The Fibonacci levels are drawn from 1.3674 to 1.3136 on the hourly chart and from 1.3158 to 1.3655 on the 4-hour chart.