Analysis of GBP/USD 5M
The GBP/USD currency pair also showed no interesting movements on Tuesday. Today, the UK will release an inflation report for February, but it does not attract much interest. Traders are more interested in the consumer price data for March, when the war in the Middle East began, and energy prices skyrocketed. February inflation in the UK may remain unchanged at 3%. Yesterday, business activity indices for the services and manufacturing sectors were published in the UK, but they did not spark any interest among traders. In the services sector, activity dropped from 53.9 to 51.2, while in the manufacturing sector, it decreased from 51.7 to 51.4. Thus, the decline of the British pound throughout the day can even be considered justified. However, we believe that the market has received no confirmation of Trump's statements regarding negotiations with Iran, but has also not been able to completely refute them. Therefore, it simply paused until circumstances became clearer.
From a technical standpoint, an upward trend is also forming for the pound, but it looks just as feeble as the trend for the euro. The trend line has a minimal slope, and corrections and pullbacks take up to 90% of the preceding growth. Thus, there is currently no talk of the pound's dominance. Last week, the British currency received support from the Bank of England, but it is already evident how much interest the market has in monetary policy. Traders' attention remains focused on geopolitics.
On the 5-minute timeframe on Tuesday, three trading signals were formed. During the European trading session, the price bounced from 1.3437, then dropped to the area of 1.3369-1.3377, allowing traders to open short positions for profit. This was followed by two buy signals, each of which failed to reach the nearest target.
COT Report
COT reports for the British pound indicate that commercial traders' sentiment has been changing steadily in recent years. The red and blue lines, reflecting the net positions of commercial and non-commercial traders, frequently cross and are usually close to the zero mark. Currently, the lines are diverging, with non-commercial traders continuing to dominate... sales. However, given the events in the Middle East, it is not surprising that demand for riskier 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 clearly seen on the weekly timeframe (illustration above). The trade war will continue in one form or another for a long time, and the Fed will, in any case, resume easing monetary policy. Demand for the dollar will decline in the future regardless. However, geopolitical factors are currently at the forefront, providing strong support for the US currency. According to the latest COT report (dated March 17), the "Non-commercial" group closed 4,900 BUY contracts and 23,700 SELL contracts. Consequently, the net position of non-commercial traders increased by 18,800 contracts over the week.
Analysis of GBP/USD 1H
On the hourly timeframe, the GBP/USD pair has started to rise, breaking the downward trend, and has a real chance of recovering losses over the past month and a half. However, the upward movement is extremely weak, as the market continues to closely monitor events in the Middle East. Despite the significant decline in the pair during February-March, we still consider it a correction. The daily timeframe confidently signals the preservation of an upward trend. Unfortunately, geopolitics remains quite complex and could provoke movement in either direction.
For March 25, 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 (1.3350) and Kijun-sen line (1.3360) may also serve as sources of signals. It is recommended to set the Stop Loss at breakeven if the price moves in the correct direction by 20 pips. The Ichimoku indicator lines may shift during the day, which should be taken into account when determining trading signals.
On Wednesday, the UK is scheduled to publish the inflation report, which could theoretically provoke a market reaction if its value does not match the forecasted 3%. The US events calendar is completely empty.
Trading Recommendations:
Today, traders may open short positions if the price consolidates below the 1.3350-1.3377 range, targeting 1.3201-1.3212. Long positions will become relevant with a target of 1.3456-1.3480 if the price bounces from the area of 1.3350-1.3377.
Explanations for Illustrations:
Support and resistance price levels (resistance/support) are thick red lines near which movement may end. They are not sources of trading signals.
Kijun-sen and Senkou Span B lines are Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour timeframe. They are strong lines.
Extreme levels are thin red lines from which the price has previously bounced. They are sources of trading signals.
Yellow lines indicate trend lines, trend channels, and any other technical patterns.
Indicator 1 on COT charts represents the size of the net position for each category of traders.
