Analysis Of GBP/USD 5M

The GBP/USD currency pair traded very sluggishly on Friday, and overall, the week ended poorly for the British currency. Firstly, the pair consolidated below the 1.3201-1.3212 area, which suggests further declines on Monday. Secondly, the pair is near its local bottom, indicating that there are very few buyers in the market right now. While the euro has gained some stability in recent weeks, the British pound continues to slide. The reason is clear—geopolitics. However, the euro and the pound respond to it slightly differently, as practice shows.

From a technical standpoint, forming new trend lines or channels does not make much sense. Trend lines can be drawn daily, but the market pays no attention to them. Similarly, many other technical factors are being disregarded. A downward trend is indeed evident, but if Trump delays his decision to strike Iran by another 10 days, the British pound may experience a surge of optimism. If the war seems to be ending, the dollar may lose perhaps its only support. Thus, the situation remains unstable and is solely dependent on geopolitics, which is extremely difficult to predict.

On the 5-minute timeframe, one trading signal was formed on Friday, with volatility remaining minimal despite the strong macroeconomic backdrop. During the American trading session, the price consolidated below the 1.3201-1.3212 area, but by the end of the day, it moved down by a maximum of 10 pips. As a result, there was hardly any profit from this trade.

COT Report

The COT reports for the British pound show that commercial traders' sentiment has been changing steadily in recent years. The red and blue lines representing the net positions of commercial and non-commercial traders frequently cross each other and are often close to the zero mark. Currently, the lines are moving further apart, with non-commercial traders predominantly holding... short positions. However, given the events in the Middle East, it is no longer surprising that demand for risk currencies is falling while demand for the dollar is rising.

In the long term, the dollar continues to decline due to Donald Trump's policies, as shown on the weekly timeframe (illustration above). The trade war will continue in one form or another for a long time. However, currently, geopolitical factors are at the forefront, providing strong support for the US currency. According to the latest COT report (dated March 31), the "Non-commercial" group opened 4,800 BUY contracts and closed 900 SELL contracts. Consequently, the net position of non-commercial traders increased by 5,700 contracts over the week.

Analysis Of GBP/USD 1H

On the hourly timeframe, the GBP/USD pair has shifted to form yet another downward trend, which could also be canceled soon. The market continues to closely monitor events in the Middle East, which account for 90% of market movements. Despite the significant decline of the pair in February-March, we still regard it as a correction in the long-term perspective (weekly timeframe). The daily timeframe confidently signals the maintenance of an upward trend. Geopolitics continues to dominate the currency market.

On April 6, we highlight the following important levels: 1.3096-1.3115, 1.3201-1.3212, 1.3369-1.3377, 1.3465-1.3480, 1.3533-1.3548, 1.3615, 1.3671-1.3681, 1.3751-1.3763. The Senkou Span B line (1.3319) and Kijun-sen line (1.3251) may also serve as sources of signals. It is recommended to set a Stop Loss at breakeven if the price moves in the correct direction by 20 pips. The lines of the Ichimoku indicator may shift during the day, which should be considered when determining trading signals.

On Monday, there are no major events scheduled in the UK, while in the US, the ISM Services Index, a key indicator, will be released. Unfortunately, the market continues to ignore almost all macroeconomic data, anticipating a resolution between Iran and the US. Therefore, the pair could swing in either direction at any moment.

Trading Recommendations:

Today, traders may consider remaining in short positions with a target of 1.3096-1.3115, as the area of 1.3201-1.3212 has been breached. Long positions can be reopened with targets at the Kijun-sen and Senkou Span B lines if the price consolidates above the 1.3201-1.3212 area.

Explanations For Illustrations:

• Support and resistance price levels – thick red lines around which movement may end. They are not sources of trading signals.
• Kijun-sen and Senkou Span B lines – lines of the Ichimoku indicator transferred from the 4-hour timeframe to the hourly timeframe. They are strong lines.
• Extreme levels – thin red lines from which the price previously bounced. They 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.