The British pound currency has continued to rally above the 1.2500 level against the US dollar after a quick dip towards the 1.2300 area as traders start to price in no Fed rate hikes this month.
Sterling started to rally after Fed Governor Philip Jefferson and Philadelphia Fed President Patrick Harker sent a message to the market as both members expressed a preference to skip a potential interest.
Now, the market implied probabilities of a rate hike this month sat at 71% ahead of the comments yesterday and this morning has reversed, now down at just 42.4%. Such a massive shift in sentiment leaves the dollar vulnerable and opens the door.
Sterling is also set for volatility, as the US monthly jobs report is set to be released today and the consensus estimate is for 190,000 jobs to be released and the Unemployment rate consensus estimate is for 3.5% vs 3.4% prior.
Elliot wave analysis also show that a final correction may have happened and the GBPUSD pair is in the stages of a WXY play, with the final Y wave to create new highs towards 1.3000.
Looking at sentiment data and how traders feel about sterling, the ActivTrader Market Sentiment tool shows that traders are growing more bearish despite the recent sharp price reversal.
With 65% of traders are currently bearish and it should be noted that this current sentiment reading is highlighting that sterling still has much scope to trade even higher.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame the GBPUSD pair now looks very bullish on the lower time frames. I think a move above 1.2650 could form a large bullish reversal pattern.
According to technical analysis, as long as BTC trades above the 1.2470 level then a move towards the 1.2650 should be coming down the pipeline.
GBPUSD Medium-term Technical Analysis
According to the daily time frame it shows that that GBPUSD pair has undergone a classic Elliot wave correction, with a 1,2,3,4,5 wave higher, and ABC correction done.
The WXY sequence is now playing out, we could see a ramp towards the 1.3000 level. Watch out for a coming power rally towards the highs of the year and then new highs.