On the hourly chart, GBP/USD continued to trade above the 1.3164–1.3177 support level on Monday. Following a rebound from this zone, the upward movement may continue toward the 100.0% retracement level at 1.3272. Consolidation below the 1.3164–1.3177 level would signal a resumption of the pound's decline toward the next Fibonacci level of 161.8%, at 1.3025.

The market situation remains completely bearish. The latest completed upward wave failed to break the previous high, while the latest downward wave, which is still forming, broke the previous low. Thus, the bears continue to maintain control of the market. The FOMC's tightening monetary policy stance and the hawkish outlook communicated by Kevin Warsh sharply strengthened the dollar. A reversal of the current trend is now possible only above 1.3567 or after the formation of two bullish waves.

The fundamental backdrop on Monday allowed the bulls to avoid losing further ground. The war in Yemen did not put significant pressure on the pound sterling, while the US ISM Services PMI did not provide significant support for the dollar. Thus, the bears and bulls remained in a relative and fragile balance throughout the day. If the main reason for the dollar's growth over the past month was the FOMC's increasingly hawkish stance, the dollar should now begin to decline for exactly the same reason. Last week, Federal Reserve official John Williams indicated that there was no need to rush into further monetary policy tightening, while the FOMC could vote for only one rate hike by the end of the year. Thus, the market's hawkish expectations have already weakened, while the Bank of England is at the same time preparing for its first policy tightening at the next meeting. However, the bulls remain extremely weak and are currently unable to counter the pressure from the bears. The problem lies precisely with the bulls, which are not in a hurry to take action despite having the necessary fundamental backdrop.

On the 4-hour chart, GBP/USD reversed in favor of the pound after another bullish divergence formed on the CCI indicator. Thus, in the near term, the pound may return to the 76.4% retracement level at 1.3277. A rebound from this level would favor the US dollar and a resumption of the decline toward the 100.0% retracement level at 1.3159. No new emerging divergences are currently observed on any indicator.

Commitments of Traders (COT) Report:

The sentiment of the Non-commercial trader category became even more bearish over the latest reporting week. The number of Long positions held by speculators decreased by 13,059 for the fifth consecutive week, while the number of Short contracts decreased by only 4,552. The current gap between the number of Long and Short positions is approximately 41,000 versus 132,000. The bears' advantage is increasing again. Previously, the bears' dominance did not raise any questions, but it does now because the fundamental backdrop has changed in recent months.

The bearish trend in the pound is still not considered convincing, but in the near term, everything will depend on Trump's trade policy, the monetary policy of the Federal Reserve and the Bank of England, as well as the duration, scale, and consequences of the war in the Middle East. In recent months, the market has shifted toward expectations of peace, but negotiations between Iran and the United States failed before they had properly begun. There is also no certainty that they will resume in the near future.

News Calendar for the United States and the United Kingdom:

• United Kingdom – Construction PMI (08:30 UTC).
• United States – ADP Weekly Employment Change (12:15 UTC).

The October 6 economic calendar contains two entries, both of which can be considered secondary. The impact of the economic backdrop on market sentiment on Tuesday will be absent or extremely limited.

GBP/USD Forecast and Trading Tips:

Selling the pair is possible today if the price consolidates below the 1.3164–1.3177 level on the hourly chart, with a target of 1.3025. Buying is possible today following a rebound from the 1.3164–1.3177 level, with a target of 1.3272.

The Fibonacci grids are drawn from 1.3272–1.3674 on the hourly chart and from 1.3158–1.3655 on the 4-hour chart.