Analysis of GBP/USD 5M
The GBP/USD pair fell sharply on Tuesday, like a stone. This was certainly justified, as in recent weeks we have observed average volatility of around 50-60 pips. Yesterday, the British pound lost about 120 pips during the day and only slightly recovered by the evening. The unexpected collapse of sterling was another unfortunate statement from UK Chancellor Rachel Reeves, who is already known for her regular negative impact on the British currency. This time, Reeves hinted that leaving the EU was a mistake for Britain and that the current government is diligently working to restore ties with the Alliance.
Additionally, this evening, the FOMC meeting results will be announced, which are already known. However, predicting how the market will react to this event is not something one wishes to do. We believe that the dollar should fall in any case, but the market continues to focus only on negative factors affecting the British pound.
From a technical point of view, there is currently nothing clear on the hourly timeframe. Trading on the 5-minute timeframe is possible, but a definitive trend is absent. It's best to analyze the daily timeframe, which clearly shows the flat's continuation.
On the 5-minute timeframe, despite the sudden drop, three signals were formed yesterday, two of which were very good. Initially, the pair bounced off the area of 1.3369-1.3377, then from the level of 1.3307, and later it breached that level. Thus, traders could have opened three trades, two of which were profitable.
COT Report
The latest COT reports for the British pound show that, in recent years, commercial traders' sentiment has been constantly changing. The red and blue lines representing net positions of commercial and non-commercial traders continuously intersect and are mainly close to the zero mark. Currently, they are at nearly the same level, indicating roughly equal numbers of buy and sell positions.
The dollar continues to decline due to Donald Trump's policies; therefore, in principle, the demand from market makers for the British pound is not very significant right now. The trade war will continue in one form or another for a long time. The Fed is likely to reduce rates over the next year. Demand for the dollar will decrease one way or another. According to the latest report on the British pound, the "Non-commercial" group opened 3,700 BUY contracts and closed 900 SELL contracts. Consequently, the net position of non-commercial traders increased by 4,600 contracts over the week.
In 2025, the pound rose significantly, but it should be understood that there is only one reason: Donald Trump's policies. Once this reason is mitigated, the dollar may start to recover, but nobody knows when this will happen. It doesn't matter how quickly the net position for the pound rises or falls. The net position for the dollar is declining regardless, and generally at a higher pace.
Analysis of GBP/USD 1H
On the hourly timeframe, the GBP/USD pair has finally completed its downward trend and has begun a new upward trend. However, it started this upward movement two weeks ago, and since then, the pound has primarily been declining. Currently, the pair is near its previous low, making it impossible to assess the current trend. To resume the upward trend, a break above the Senkou Span B and Kijun-sen lines is required. The dollar still lacks global reasons to strengthen, so we expect the pair to rise towards the 2025 highs in almost any scenario. The key is to end the flat on the daily timeframe as soon as possible.
On October 29, we identify the following important levels for trading: 1.3125, 1.3212, 1.3307, 1.3369-1.3377, 1.3420, 1.3533-1.3548, 1.3584, 1.3681, 1.3763, 1.3833, and 1.3886. The Senkou Span B (1.3358) and Kijun-sen (1.3312) lines may also serve as sources of signals. It is recommended to set a Stop Loss to breakeven once the price moves 20 pips in the correct direction. The Ichimoku indicator lines may shift during the day, which should be considered when determining trading signals.
On Wednesday, there are no significant or interesting events scheduled in the UK, while in the U.S., the FOMC meeting will take place, likely provoking strong market reactions.
Trading Recommendations:
Today, traders can trade from levels 1.3212 and 1.3307. Technically, the trend is currently once again downward, but the FOMC meeting could provoke movement in any direction.
Explanations for the Illustrations:
- Price Support and Resistance Levels: Thick red lines that indicate where movement may conclude. These lines do not serve as sources of trading signals.
- Kijun-sen and Senkou Span B Lines: Lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour timeframe. They are strong lines.
- Extreme Levels: Thin red lines from which the price has previously bounced. These lines serve as sources of trading signals.
- Yellow Lines: Trend lines, trend channels, and other technical patterns.
- Indicator 1 on COT Charts: The size of the net position for each category of traders.
