On the hourly chart, the GBP/USD pair on Wednesday completed a reversal in favor of the U.S. currency and pulled back to the support level of 1.3595–1.3620. A rebound of quotes from this zone today would work in favor of the British pound and some growth toward the Fibonacci level of 161.8% at 1.3755. A consolidation below the 1.3595–1.3620 level would allow expectations of a continued decline toward the support level of 1.3526–1.3539 and the corrective level of 100.0% at 1.3470.

The wave situation remains "bullish." The last completed upward wave did not break the previous peak, but the last downward wave also failed to break the previous low. The news background for the pound has been weak in recent months, but the news background in the U.S. has been even worse. The bulls regularly receive support from Donald Trump. A break of the current trend can be identified by a consolidation of quotes below the 1.3595–1.3620 level.

The news background on Wednesday did not bode well for the bears. The very first U.S. labor market report turned out to be a failure. According to the ADP report, the number of new jobs in January amounted to only 22 thousand. Traders' expectations ranged from 35 thousand to 48 thousand, and these values are also considered very low. Thus, the U.S. labor market remains in a state of shock after Donald Trump's trade tariffs and his immigration policy. In my view, this report could have caused a sharp decline in the dollar in the second half of the day, but for some reason traders paid more attention to the ISM services PMI. Its value is certainly positive, but it exceeded traders' expectations by only 0.3 points. I believe that weakness in the labor market is more important than strength in business activity. In a few hours, the results of the Bank of England meeting will become known, and the market has already begun selling the British pound, probably expecting more "dovish" outcomes. However, I would not rush to conclusions. The 1.3595–1.3620 level supports the pound.

On the 4-hour chart, the pair rose to the Fibonacci level of 127.2% at 1.3795 and rebounded from it. Thus, a reversal in favor of the U.S. dollar followed, and a decline began toward the support level of 1.3369–1.3435. A consolidation above the 1.3795 level 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 6,454, while the number of short positions increased by only 636. The gap between the number of long and short positions is now effectively as follows: 87 thousand versus 104 thousand, and it is rapidly narrowing. In recent months, bears have dominated, 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 opinion, the pound still looks less "dangerous" than the dollar. In the short term, the U.S. currency may enjoy demand in the market from time to time, but not in the long term. Donald Trump's policy has led to a sharp decline in the labor market, and the Fed is forced to ease monetary policy in order 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.:

• United Kingdom – Bank of England interest rate decision (12:00 UTC).
• United Kingdom – MPC vote results on the interest rate (12:00 UTC).
• United Kingdom – Bank of England accompanying statement (12:00 UTC).
• United States – Change in initial jobless claims (13:30 UTC).

On February 5, the economic events calendar contains four entries. The impact of the news background on market sentiment on Thursday may be present after the Bank of England meeting.

GBP/USD Forecast and Trading Advice:

Selling the pair is possible today if it closes below the 1.3595–1.3620 level on the hourly chart, with targets at 1.3526–1.3539 and 1.3470. Buying positions can be opened on a rebound from the 1.3595–1.3620 level on the hourly chart, with a target of 1.3755.

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