GBP/USD 5-Minute Analysis

The GBP/USD currency pair experienced a significant decline on Thursday, dropping to the Senkou Span B line. Previously, the price had consolidated below the ascending trendline, signaling the potential end of the correction. Subsequently, the pair traded in a clear sideways movement for several days, but yesterday, without any strong reasons for a drop, the pair plunged downward. Interestingly, both the euro and the pound sterling fell to the Senkou Span B line. Today, the future movement of both pairs will depend on whether these lines are broken.

We have repeatedly mentioned the likelihood of the pound resuming its downtrend. As demonstrated, this did not require any new UK or US data. However, macroeconomic data from the US labor market turned out decent, and inflation showed slight growth. Consequently, based on the available factors, the pound's decline and the dollar's rise seemed inevitable. If the downtrend has resumed, we can expect further declines in the British currency in the near term, regardless of the news flow.

Unfortunately, yesterday's movements were quite challenging to capitalize on. The price came close to forming a sell signal near the 1.2796 level but missed it by just a few points. All other signals were formed within the 1.2666–1.2719 zone, which contained two levels and two lines. As a result, acting on these signals was impractical. Today, if the price consolidates below the Senkou Span B line, further declines in the pair should be anticipated.

COT Report

COT reports for the British pound reveal that the sentiment among commercial traders has fluctuated significantly over the past years. The red and blue lines representing net positions of commercial and non-commercial traders frequently cross and typically remain near the zero mark. The price has broken through the 1.3154 level and subsequently approached the trendline. We believe the trend has shifted to bearish, and further consolidation below the trendline is anticipated.

The latest COT report shows that the "non-commercial" group closed 400 BUY contracts and opened 1,900 SELL contracts. As a result, the net position of non-commercial traders decreased by 2,300 contracts over the week.

The fundamental backdrop does not justify long-term purchases of the pound sterling. The currency has a genuine chance to resume its broader downtrend. While the trendline has thus far prevented further declines, failure to breach it could lead to a new upward wave, potentially pushing the pound above 1.3500. However, what fundamental basis exists for such growth at the moment?

GBP/USD 1-Hour Analysis

The GBP/USD pair maintains a bearish bias on the hourly timeframe, and the correction may already be complete. We still do not see any fundamental reasons for the rise of the pound sterling, except for the technical need to correct occasionally. The price has already corrected in this case, so further declines are expected in the coming weeks. While the upcoming Bank of England and Federal Reserve meetings could negatively impact the dollar, the likelihood of this is low.

The following key levels are highlighted for trading: 1.2429–1.2445, 1.2516, 1.2605–1.2620, 1.2691–1.2701, 1.2796–1.2816, 1.2863, 1.2981–1.2987, 1.3050. The Senkou Span B (1.2666) and Kijun-sen (1.2728) could also serve as signal sources. Setting a Stop Loss at breakeven after the price moves 20 pips in the intended direction is recommended. The Ichimoku lines may shift throughout the day, so this should be considered when identifying trading signals.

The UK is set to release reports on industrial production and GDP for October. However, as the GDP data is monthly, it is unlikely to have a significant market impact. Similarly, the industrial production report is not particularly important and is not expected to support the British currency.

Illustration Explanations:

• Support and Resistance Levels (thick red lines): Key areas where price movement might stall. Not sources of trading signals.
• Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the H4 timeframe to the hourly chart, serving as strong levels.
• Extreme Levels (thin red lines): Points where the price has previously rebounded. They can serve as trading signal sources.
• Yellow Lines: Trendlines, channels, or other technical patterns.
• Indicator 1 on COT Charts: Reflects the net position size of each trader category.