On the hourly chart, the GBP/USD pair continued its decline on Tuesday and closed below the support zone of 1.3357–1.3371. As a result, the British pound may continue falling on Wednesday toward the next Fibonacci level of 127.2% – at 1.3258. A consolidation above the 1.3357–1.3371 zone would support the pound and allow for some growth toward the 1.3425 and 1.3470 levels.

The wave structure has once again shifted in favor of the bulls—only to reverse back immediately. At the moment, the last upward wave broke above the highs of the two preceding waves, but the most recent downward wave broke all previous lows. Therefore, the trend can again be considered "bearish." However, the information background played a significant role in supporting the bears. If sentiment shifts against them in the near future, we could see an equally strong upward wave, and the trend may once again become "bullish." The situation remains ambiguous and largely depends on this week's news flow.

On Tuesday, the news background did not influence trader sentiment, but today's market conditions will be different. This evening marks the conclusion of the Fed's two-day meeting, at which monetary policy parameters are expected to remain unchanged. The FOMC currently has no grounds to even consider lowering interest rates, especially since the next labor market report will be released this Friday and the next inflation report in mid-August. These two indicators remain closely monitored by the Fed, while President Trump's calls for immediate rate cuts continue to be ignored. Therefore, unless we see critical changes in these two data points, changes in monetary policy should not be expected. For the dollar, this Fed stance may prove quite beneficial, since any policy easing is a bearish factor. In the absence of easing or even plans to ease, the dollar may continue to rise—aligning with the current technical outlook.

On the 4-hour chart, the pair generally continues its decline and has completed a new reversal in favor of the U.S. currency. Consolidation below the 1.3378–1.3435 support zone allows traders to count on further decline toward the next 76.4% retracement level at 1.3118. No imminent divergences are observed from any indicator today. A consolidation above the 1.3378–1.3435 zone would shift the market's attack vector in the opposite direction.

Commitments of Traders (COT) Report:

The sentiment of the "Non-commercial" trader category became significantly less bullish over the latest reporting week. The number of long positions held by speculators decreased by 7,220, while the number of short positions increased by 21,401. Bears have started retreating sharply, possibly due to the rising appeal of the dollar amid Washington's trade deal successes. The gap between long and short positions is now virtually zero: 93,000 vs. 93,000.

In my view, the pound still has downward potential. The news background for the dollar was extremely negative in the first six months of the year, but it is slowly turning more favorable. Trade tensions are easing, major deals are being signed, and the U.S. economy is set to recover in the second quarter thanks to tariffs and various types of investment into the U.S.

Economic calendar for the U.S. and UK:

• U.S. – ADP Employment Change (12:15 UTC)
• U.S. – Q2 GDP Data (12:30 UTC)
• U.S. – Fed Interest Rate Decision (18:00 UTC)
• U.S. – Fed Press Conference (18:30 UTC)

On Wednesday, the economic calendar includes four key releases. The impact of the news background on trader sentiment will likely be strong in the second half of the day.

GBP/USD Forecast and Trading Advice:

Selling the pair was possible after it closed below the 1.3425 level on the hourly chart, and later after a close below the 1.3378–1.3435 support zone on the 4-hour chart. Thus, short positions can currently be held with a target of 1.3258. Long positions can be opened if the pair closes above the 1.3357–1.3371 zone on the hourly chart, with targets at 1.3425 and 1.3470.

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