Analysis of GBP/USD 5M
GBP/USD started a downward movement on Monday and even broke the trendline. However, this doesn't mean much as the trendline has a very steep angle, so almost any downward retracement would lead to a breakthrough. The crucial point is that the price continues to stay above the Kijun-sen line, so we don't expect a significant decline in the pound. Of course, in case it breaks the critical line, the price could fall down to the Senkou Span B. Overall, we expect the pound to fall. However, the market continues to ignore the US dollar, disregarding any macroeconomic and fundamental factors, so there is virtually no logic behind the pair's movements at the moment.
On Monday, there was no significant information. After the pair traded higher for a week and a half, a correction was anticipated. However, this correction does not provide any special prospects for the US dollar. If today's US inflation report does not meet the market's expectations, the dollar could fall. The price has not been able to break even the critical line yet.
Speaking of trading signals, there was only one signal and it was formed during the Asian session with an error of 2 pips. The price rebounded from the level of 1.2863, but by the opening of the European session, it hadn't moved far from the point of formation. Therefore, you could open short positions. And by the end of the day, the price had dropped almost to the level of 1.2786, so the shorts could be manually closed. The profit was around 40 pips, which is quite good for a "boring Monday."
COT report:
COT reports on the British pound show that the sentiment of commercial traders has frequently changed in recent months. The red and blue lines, which represent the net positions of commercial and non-commercial traders, constantly intersect and, in most cases, remain close to the zero mark. According to the latest report on the British pound, the non-commercial group opened 10,300 buy contracts and closed 1,700 short ones. As a result, the net position of non-commercial traders increased by 12,000 contracts in a week. Despite the fact that the net position of speculators is growing, the fundamental background still does not provide a basis for long-term purchases of the pound sterling.
The non-commercial group currently has a total of 102,000 buy contracts and 43,900 sell contracts. The bulls have a big advantage. However, in recent months, we have repeatedly encountered the same situation: the net position either increases or decreases, the bulls or the bears either have the advantage. Since the COT reports do not provide an accurate forecast of the market's behavior at the moment, we have to scrutinize the technical picture and economic reports. The technical analysis suggests that there's a possibility that the pound could show a pronounced downward movement, but there is currently no sell signal on any timeframe.
Analysis of GBP/USD 1H
On the 1H chart, GBP/USD resumed the uptrend after a three-month flat period. The economic reports and the fundamental background do not support the British pound, but we have already seen something similar in the second half of 2023. Back then, the British pound also increased for no apparent reasons. If the price consolidates below the trendline, we can hope that the dollar may start a small corrective phase. But today, the US inflation report can spoil everything. On the other hand, the market could show an illogical reaction to the report.
As of March 12, we highlight the following important levels: 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2516, 1.2605-1.2620, 1.2691, 1.2786, 1.2863, 1.2981-1.2987. The Senkou Span B line (1.2666) and Kijun-sen line (1.2781) lines can also serve as sources of signals. Don't forget to set a Stop Loss to breakeven if the price has moved in the intended direction by 20 pips. The Ichimoku indicator lines may move during the day, so this should be taken into account when determining trading signals.
On Tuesday, the UK will release reports of moderate significance: on wages, unemployment, and unemployment claims. These reports may only provoke a local market reaction. The main event for the day will be the US CPI inflation data for February. Investors will closely watch whether the latest values match forecasts or not.
Description of the chart:
Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;
Yellow lines are trend lines, trend channels, and any other technical patterns;
Indicator 1 on the COT charts is the net position size for each category of traders;
