Analysis of GBP/USD 5M

The GBP/USD currency pair surged by an extraordinary amount over the past 24 hours. The upward movement began (or resumed) during the Asian trading session, and throughout the day, the British pound rose by 130 pips, something that hasn't happened in a long time. In general, discussing the reasons makes little sense, as they were the same as for the EUR/USD pair. However, the euro rose only 60 pips, while the pound rose twice as much. Why? From our perspective, the pound has fallen significantly more than the euro in recent months, and that's why it is now rising strongly. We have repeatedly pointed out the illogicality of such a sharp decline in the British currency. Hence, this powerful rise does not surprise us at all. Yesterday, we also mentioned that the consolidation below the trend line should not mislead, as the upward trend remains above the Senkou Span B line. Last night, the pair consolidated above the 1.3201-1.3212 range and continued to rise.

Reports from the U.S. served the pound well yesterday. The ADP report failed, raising the likelihood of new monetary policy easing from the Federal Reserve to 100%. Reports on industrial production and the ISM services sector remained better than forecasts, but they did not save the dollar from its inevitable decline.

Unfortunately, on the 5-minute timeframe, the trading signal to buy, which allowed for the completion of yesterday's movement, was formed overnight. Those traders who acted on it made good profits, as the target level of 1.3307 was reached.

COT Report

COT reports on the British pound indicate that, in recent years, commercial traders' sentiment has been consistently changing. The red and blue lines displaying the net positions of commercial and non-commercial traders have been crossing frequently, often staying near the zero mark. Currently, they are at nearly the same level, which indicates a roughly equal number of long and short positions.

The dollar continues to weaken due to Donald Trump's policies, as clearly seen on the weekly timeframe. The trade war is likely to continue in one form or another for a long time. The Federal Reserve is set to lower rates in the next 12 months. Demand for the dollar will decline one way or another. According to the last COT report (as of October 14) regarding the British pound, the "Non-commercial" group closed 14,900 long contracts and 7,700 short contracts. Consequently, the net position of non-commercial traders decreased by 7,200 contracts over the week. However, this data is already outdated, and no fresh information is available.

In 2025, the pound significantly increased, but it should be understood that the reason is single – Donald Trump's policies. Once this reason is neutralized, the dollar may strengthen, but when that will happen remains uncertain. Regardless of how fast the net position of the pound rises or falls, the dollar's net position is decreasing, and usually at a faster pace.

GBP/USD Analysis 1H

On the hourly timeframe, the GBP/USD pair continues to form an upward trend. We believe that medium-term growth will continue regardless of the local macroeconomic and fundamental backdrop, and that the correction on the daily timeframe will eventually finish. Or it may have already finished. The British pound finally showed the movement we were waiting for. It's a sin not to continue this trend.

For December 4, we highlight the following important levels: 1.2863, 1.2981-1.2987, 1.3042-1.3050, 1.3096-1.3115, 1.3201-1.3212, 1.3307, 1.3369-1.3377, 1.3420, 1.3533-1.3548, and 1.3584. The Senkou Span B (1.3152) and Kijun-sen (1.3261) lines can also serve as signals. It is recommended to set the Stop Loss to breakeven when the price moves in the right direction by 20 pips. The Ichimoku indicator lines may shift during the day, which should be taken into account when determining trading signals.

On Thursday, the UK is scheduled to release the construction sector activity index, while the U.S. will report unemployment claims. Both reports are secondary. Thus, market reactions may be extremely weak, and volatility may significantly decrease.

Trading Recommendations:

Today, traders may consider selling if the price bounces from the 1.3369-1.3377 area, targeting 1.3307. Long positions will become relevant upon consolidation above the region of 1.3369-1.3377 with a target of 1.3420 or on a bounce from the 1.3307 level with a target of 1.3369-1.3377.

Illustration Explanations:

• Support and Resistance Levels: Thick red lines where price movement may end. These are not sources of trading signals.
• Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines projected onto the hourly timeframe from the 4-hour timeframe. These are strong lines.
• Extreme Levels: Thin red lines where the price previously rebounded. These are sources of trading signals.
• Yellow Lines: Trend lines, trend channels, and any other technical patterns.
• Indicator 1 on COT Charts: The size of the net position for each category of traders.