GBP/USD closed above the descending trendline and continued to rise until settling above the Fibo retracement level of 423.6% located at 1.1306. The next upward target is seen at 1.1480. Looking at the chart below, you may say that the rise was not so impressive. But this is all about the scale. During rapid moves, the scale is reduced, and you may think that the movement was weak. In reality, the pound advanced by 1,050 pips in seven days. This is actually a lot even for such a volatile currency. This also signals the end of the downtrend and the fact that the pound is not going to fall anytime soon. I would like to note that GBP has been rising for two consecutive days even though the information background is not so favorable. Yesterday, the S&P Global/CIPS UK manufacturing PMI went up to 48.3, which is still a moderate reading. The Manufacturing PMI in the US came in mixed even though it reflects the state of one sector.

Therefore, I can conclude that the British currency is gaining ground without any support from the fundamentals which is a positive and encouraging sign. GBP has been falling for so long, and its recent drop was just beyond normal. As I see it, the market has already digested all negative news associated with the sterling. The topic of tax cuts in the UK broke into the agenda and disappeared just as quickly. It turned out that most of the tax rates will remain unchanged except for the core income tax rate. Besides, traders took into account the fact that the Bank of England has been actively raising rates throughout the whole year which is definitely a positive factor for the national currency. Up to September 26, the pound seemed to ignore all steps taken by the UK regulator. Now, traders started to price in all these changes in the monetary policy.

On H4, the pair resumed its upside movement towards the upper line of the descending trend channel and then tested it. A firm hold above this line will mark the final obstacle for the pound. In case of its breakout, the price is very likely to head for upper targets of 1.1496 and 1.1709. On the other hand, a pullback from this boundary will benefit the US dollar and will initiate a slight fall towards the Fibo retracement level of 200.0% at 1.1111.

Commitments of Traders (COT) report:

Last week, the non-commercial category of traders became much less bearish on the pair than the week earlier. Long contracts increased by 18,542 while short contracts fell by 10,123. Yet, the overall sentiment of large market players remains bearish as the number of short contracts still outweighs the number of long ones. Large market participants prefer to sell the pound even though their sentiment has been slowly changing towards bullish in recent months. However, this is a slow and lengthy process. The pound may continue its uptrend only if supported by strong fundamental data which has not been so favorable lately. The overall amount of long contracts is a bit higher than the short ones which indicates a bullish market. At the same time, any negative news may quickly reverse the trend to the opposite.

Economic calendar for US and UK:

US - JOLTs Job Openings (14-00 UTC).

On Tuesday, the UK will publish only one report that may have no influence on the market. Traders are now busy buying the pair. The information background may have little impact on trading today.

GBP/USD forecast and trading tips:

I recommend selling the pair with the target at 1.1111 if the price rebounds from the upper line of the descending channel on the 4-hour chart. It is also good to buy the pound now since the price has closed above the trendline on H1. The upward targets are found at 1.1480 and 1.1684.