The GBP/USD pair dropped to the 1.2007 level on Wednesday, according to the hourly chart. We were able to reverse the trend in favor of the British pound and start the process of growth toward the corrective level of 127.2% (1.2112), thanks to the rebound from this level. Rebounding from this level will once again allow the British pound to drop to the level of 1.2007, while surpassing 1.2007 will raise the possibility of dropping to the side corridor's lower line.

For the pound, yesterday might have been dull and uninspiring. There are no economic events scheduled in the UK, and there were no significant reports released in the US. Yet, some of them were fascinating. For instance, February saw a 0.4% decline in retail sales, and the producer price index dropped to 4.6%. The fact that the European bank Credit Suisse was experiencing financial and other issues yesterday, however, did not affect the traders' mood. Due to their strong correlation and intimate ties to one another, the European currency instantly fell, along with the pound sterling. We might therefore conclude that the euro is to blame for the decline of the British pound. Today, a similar pattern may be seen. The euro and the pound may both continue to decline if the ECB surprises traders unfavorably. I am almost certain that today will be just as exciting as yesterday.

I'd also want to point out that traders can overlook at least three interesting entries on the American calendar. The "important" marks have a formal appearance. In recent weeks, the British pound has been edging closer and closer to a new fall, but something always stands in its way. The pound is not currently under pressure from bear traders, and bulls are also not in a rush to make any active purchases. Although the issue is nearly deadlocked, it might be addressed next week while we wait for the Fed and Bank of England meetings.

The pair displayed a new reversal in favor of the American on the 4-hour chart, dropping to the level of 1.2008. The pound will see new growth in the direction of the corrective level of 127.2% (1.2250), thanks to the quotes' rebound from this level. The likelihood of a further decline in the direction of the Fibo level of 161.8% (1.1709) will rise if quotes are closed at 1.2008. Current indicators do not show emerging divergences.

Report on Commitments of Traders (COT):

Over the past reporting week, traders in the "Non-commercial" category have become more pessimistic than they were the previous week. The CFTC still does not give new reports, thus we are currently discussing information from a month ago. Speculators now hold 3,277 more long contracts than short contracts, a difference of 4,898 units. The major players' overall outlook is still "bearish," and there are still a lot more short-term contracts than long-term contracts. The situation has shifted in favor of the British pound during the last several months, although the gap between the number of long and short positions held by speculators still exists. Moreover, "now" refers to mid-February. As a result, the pound's chances are still dismal, but the British pound is not eager to lose ground. There was an exit outside the declining corridor on the 4-hour chart, and the pound is currently supported. I do observe that many current forces, including the traders themselves, conflict with one another.

The following is the UK and US news calendar:

US – number of construction permits issued (12:30 UTC).

US – index of manufacturing activity from the Philadelphia Federal Reserve (12:30 UTC).

US – number of initial applications for unemployment benefits (12:30 UTC).

There are no economic events scheduled for Thursday in the UK, however, there will be numerous reports with average importance that day in the US. The information background may not have much of an impact on traders' attitudes.

Forecast for GBP/USD and trading advice:

As the British pound recovers from the level of 1.2112 on the hourly chart, new sales could start, with targets of 1.2007 and 1.1928. Selling at the close with targets of 1.1928 and 1.1883 is another option. On the hourly chart, buying the pair was probable when it recovered from the 1.2007 level with a target of 1.2112.