On the hourly chart, the GBP/USD pair on Monday consolidated above the 1.3595–1.3620 level and continued its upward movement toward the next correction level of 161.8% at 1.3755. Today, a rebound from the 1.3755 level may work in favor of the U.S. currency and lead to a modest decline in the pair. A consolidation above 1.3755 would increase the likelihood of further growth toward the 1.3845 level.

The wave situation remains "bearish." The most recently completed downward wave broke the previous low, while the new upward wave broke the previous high. We saw two consecutive "bearish" waves, which was enough for a trend change. To reverse the trend back to "bullish," a consolidation above the last high at 1.3730 is required. The news background for the British pound has been weak in recent months, but the news background in the U.S. has been even worse. Bulls regularly receive support from Donald Trump. In recent weeks, bears and bulls have taken turns dominating.

There was no news background on Monday, but trouble for the dollar came from an unexpected source. Chinese authorities urged banks to reduce demand for U.S. government bonds or abandon their purchases altogether. There is likely an official directive prohibiting Chinese banks from investing in U.S. Treasuries from now on. Treasury yields immediately rose, which will create additional pressure on the U.S. budget. Demand for the dollar declined, as traders expect a further deterioration in the U.S. economic situation. Donald Trump has turned half the world against himself and America, so such decisions by foreign governments come as no surprise. Trump has repeatedly threatened and blackmailed China, raised trade tariffs, and demanded a trade deal that would primarily benefit the United States. Beijing is responding with non-trade methods, as it understands that victory cannot be achieved on that battlefield. But there are other battlefields and other trump cards at the disposal of the Celestial Empire.

On the 4-hour chart, the pair rebounded from the Fibonacci level of 127.2% at 1.3795. As a result, a reversal in favor of the U.S. dollar followed, and a decline toward the support level of 1.3369–1.3435 began. The "bearish" trend on the hourly chart has not yet been completed. A consolidation above 1.3795 would allow expectations of a continuation of the "bullish" trend toward the 1.4020 level. No emerging divergences are observed today.

Commitments of Traders (COT) report:

The sentiment of the "Non-commercial" category of traders became more "bullish" over the last reporting week. The number of long positions held by speculators increased by 7,107, while the number of short positions increased by 4,856 units. The gap between the number of long and short positions is now effectively as follows: 95,000 versus 108,000, and it continues to narrow. Bears have dominated in recent months, but it seems they have exhausted their potential. At the same time, the situation with contracts on the euro currency is directly opposite. I still do not believe in a "bearish" trend for the pound.

In my view, the pound still looks less "dangerous" than the dollar. In the short term, the U.S. currency may occasionally enjoy demand in the market, but not in the long term. Donald Trump's policies have led to a sharp decline in the labor market, and the Federal Reserve is forced to pursue monetary easing to stop the rise in unemployment and stimulate the creation of new jobs. U.S. military aggression also does not add optimism for dollar bulls.

News calendar for the U.S. and the U.K.:

• U.S. – ADP Employment Change (weekly) (13:15 UTC)
• U.S. – Retail Sales Change (13:30 UTC)

On February 10, the economic calendar contains two entries that are of little interest. The impact of the news background on market sentiment on Tuesday will be weak.

GBP/USD forecast and trading advice:

Selling the pair is possible on a rebound from the 1.3755 level on the hourly chart, with a target of 1.3595–1.3620. Buying opportunities were available on a rebound from the 1.3526–1.3539 level on the hourly chart, with a target of 1.3595–1.3620. The target has been reached. New buy positions can be opened on a close above the 1.3595–1.3620 level, with a target of 1.3755. These trades can be kept open.

Fibonacci grids are drawn from 1.3470–1.3010 on the hourly chart and from 1.3431–1.2104 on the 4-hour chart.