Analysis of GBP/USD 5M
On Monday, GBP/USD continued to trade higher for the third consecutive session, much like the euro. Bank of England Governor Andrew Bailey spoke in London, but he did not mention anything important. Therefore, the pound is rising, but we can't explain why it is doing so. Nevertheless, the uptrend persists, so it wouldn't be wise to sell the pair at the moment. We expect the corrective phase to end and believe that the current upward movement is illogical. Unfortunately, the pair can continue to rise for an indefinite period. This is similar to the situation back in the first half of 2023 when the pound rose without any solid grounds.
No trading signals were generated yesterday, which is actually a good thing. The upward movement was not substantial, so there could have been a large number of false signals, similar to the euro. Even the movements and the signals on the charts show that it is quite illogical for the pair to exhibit an uptrend at the moment. Nevertheless, there's nothing we can do about it. We can only try to beat it with profit for ourselves or refrain from opening positions until analysts can predict logical movements again.
COT report:
COT reports on the British pound also align perfectly with what's happening in the market. According to the latest report on GBP/USD, the non-commercial group closed 6,100 long positions and 10,200 short ones. Thus, the net position of non-commercial traders decreased by another 4,100 contracts in a week. The net position indicator has been steadily rising over the past 12 months, but it has been firmly decreasing over the past three months. The British pound is also losing ground. We have been waiting for many months for the sterling to reverse downwards. Perhaps GBP/USD is at the very beginning of a prolonged downtrend or in the middle of a strong correction. At least in the coming months, we do not see significant prospects for the pound to rise, and even if we're currently witnessing a corrective phase, it could persist for quite some time.
The British pound has surged by a total of 2,800 pips from its absolute lows reached last year, which is an enormous increase. Without a strong downward correction, a further upward trend would be entirely illogical (if it is even planned). We don't rule out an extension of an uptrend. We simply believe that a substantial correction is needed first, and then we should assess the factors supporting the US dollar and the British pound. A correction to the level of 1.1844 would be enough to establish a fair balance between the two currencies. The non-commercial group currently holds a total of 57,500 longs and 73,800 shorts. The bears have been holding the upper hand in recent months, and we believe this trend will continue in the near future.
Analysis of GBP/USD 1H
On the 1H chart, GBP/USD continues to form another corrective phase. Last week, it failed to surpass the Kijun-sen line, so there are no technical reasons for the pair to fall. On the contrary, the market indicates that despite the fundamental background and the corrective status of the movement, it is actually ready to buy. Therefore, in our opinion, the current upward movement lacks a solid foundation. However, traders have no choice but to follow the market, follow the trend, and consider buying.
As of November 21, we highlight the following important levels: 1.1927-1.1965, 1.2052, 1.2109, 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2520, 1.2605-1.2620, 1.2693, 1.2786. The Senkou Span B (1.2347) and Kijun-sen (1.2456) lines can also be sources of signals. Signals can be "bounces" and "breakouts" of these levels and lines. It is recommended to set the Stop Loss level to break-even when the price moves in the right direction by 20 pips. The Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. The illustration also includes support and resistance levels that can be used to lock in profits from trades.
On Tuesday, the UK event calendar is empty again, while the US will publish the minutes of the Federal Reserve meeting, which we consider a secondary event. One could expect a rebound or a flat, but the market is ready to buy even without any fundamental and macroeconomic reason behind it.
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;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.
