On the hourly chart, the GBP/USD pair reversed in favor of the U.S. dollar on Friday and fell from the 1.3151 level to 1.2865 — a 300-point move in a single day. Today, the pair is trading between 1.2865 and 1.2931 but could once again "explode" in either direction. The market is in a state of panic and chaos — and the forex market is still faring better than others. Just look at what's happening in stocks and crypto.

The wave structure is perfectly clear. The last completed upward wave broke the previous high, and the new downward wave easily broke the previous low. This may suggest a trend reversal to bearish. However, considering recent developments, the strength of the moves, and the frequency of trend shifts, I wouldn't jump to such conclusions just yet. In my view, market sentiment could change five more times just this week. Everything depends on how the trade war unfolds.

Friday's news background can be considered conditionally positive for the dollar. It wasn't even U.S. economic statistics that threw the dollar a lifeline — in the current environment, those numbers barely matter to traders. Everything in the markets revolves around Donald Trump's actions and the global trade war. However, the market couldn't ignore the speech by FOMC Chair Jerome Powell.

Powell made it clear that the Fed does not intend to follow Trump's calls to cut interest rates due to a potential economic downturn. While recession is possible, the Fed needs more information on the impact of tariffs before adjusting monetary policy. As always, FOMC decisions will be based solely on economic data. The Fed's main goal remains achieving a 2% inflation rate. Since Trump's actions are likely to spur global inflation, monetary easing is unlikely in the near term. That's positive news for dollar bears — but how long will it hold?

On the 4-hour chart, the pair maintains a bullish trend. A sharp fall in the pound is unlikely until the pair closes below the ascending channel. A close below the 61.8% Fibonacci retracement level at 1.2925 would allow for a further decline toward the 50.0% level at 1.2767. Conversely, a close above 1.2925 would support renewed growth toward 1.3044.

Commitments of Traders (COT) Report:

The sentiment of the Non-commercial category became less bullish last week. Long positions among speculators fell by 4,030 and Short positions rose by 5,627. The gap between Long positions and Short positions now stands at 35,000 in favor of bulls: 105,000 vs. 70,000.

In my view, the pound still faces downward potential, but recent developments could force a long-term market reversal. Over the past three months, Long positions rose from 80,000 to 105,000, while Shorts fell from 80,000 to 70,000. More importantly, over the past 9 weeks, Long positions rose from 59,000 to 105,000, and Short positions dropped from 81,000 to 70,000.

Economic Calendar for the U.S. and U.K.:

There are no notable economic events scheduled for Monday. Therefore, news background will not influence market sentiment today.

GBP/USD Forecast and Trading Tips:

Sell the pair today upon a close below 1.2865, with targets at 1.2810 and 1.2709.

Buy the pair after a rebound from 1.2865 on the hourly chart, targeting 1.2931 and 1.3003. However, keep in mind — market chaos is more than enough right now.

Fibonacci levels were plotted from 1.2809 to 1.2100 on the hourly chart and from 1.3431 to 1.2104 on the 4-hour chart.