GBP/USD 5-Minute Analysis

The GBP/USD currency pair continued its decline on Friday, which had started on Thursday. Previously, the price broke below the ascending trendline and exited the horizontal channel. This fall was anticipated, prepared for, and has now commenced. We warned that there were no fundamental reasons for the pound to grow except for technical corrections. The pound has corrected, and it is time to resume the main trend. Additionally, macroeconomic data from the UK on Friday were once again disappointing. While we did not expect such a strong market reaction, the industrial production report and the October GDP report were significantly worse than expected. As a result, we saw another sharp drop in the British currency.

This week, many events will surround the pound and the dollar. There is no guarantee that all these events will support the dollar enough for the downward movement to continue. The price could quickly resume forming a correction, which may be longer and stronger. Therefore, the macroeconomic and fundamental background will play an important role for GBP/USD this week. Technically, the pound's decline should already continue, but fundamental and macroeconomic factors may also negatively affect the dollar.

On Friday's 5-minute timeframe, at least three good trading signals were formed. First, the price rebounded from the Senkou Span B line. Then, it worked out and bounced off the 1.2605–1.2620 area before returning to the Senkou Span B line and rebounding from it a second time. Thus, three trading signals were generated, and the nearest target was reached in each case. As a result, traders could have earned around 60–70 pips from these three trades relatively easily.

COT Report

COT reports for the British pound show that the sentiment among commercial traders has been constantly shifting in recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, frequently intersect and, in most cases, hover near the zero mark. Recently, the price broke above the 1.3154 level and then fell to the trendline. We expect the price to consolidate below the trendline, confirming a shift to a downward trend.

According to the latest report on the British pound, the "non-commercial" group opened 4,700 BUY contracts and closed 300 SELL contracts. As a result, the net position of non-commercial traders increased by 7,700 contracts over the week. However, our overall expectations remain the same.

The fundamental background still does not justify long-term purchases of the British pound. The currency has significant potential to resume a global downtrend. While the trendline has prevented further declines, should the price fail to break below it, we might see another upward movement, potentially pushing the pound above the 1.3500 level. But what fundamental factors currently support such growth? The pound cannot rise indefinitely without a solid basis.

GBP/USD 1-Hour Analysis

The GBP/USD pair generally retains its bearish outlook on the hourly timeframe, with the correction likely complete. We continue to see no fundamental drivers for the pound to rally except for the technical necessity of occasional corrections. Since the pair has already corrected, we anticipate further declines in the coming weeks. Upcoming Bank of England and Federal Reserve meetings might negatively affect the dollar, but this seems unlikely to have a significant impact.

The following key levels are identified 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 line (1.2713) and the Kijun-sen line (1.2702) may also act as potential signal levels. It is recommended to place Stop Loss at breakeven once the price moves 20 pips in the intended direction. Ichimoku indicator lines can shift during the day, which should be considered when identifying trading signals.

On Monday, the UK and the US will release PMI data for the services and manufacturing sectors. The British indices are more significant than their US counterparts. The market reaction could be substantial if actual values deviate significantly from forecasts.

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.