Analysis of GBP/USD 5M

The GBP/USD currency pair traded lower again on Tuesday, without any apparent reason. Throughout Tuesday, there were no significant macroeconomic reports or important events in either the UK or the US. Nonetheless, even without a minimum correction (once again), the British pound continued to decline. By the end of the day, it had already dropped to 1.3050 and seemed unwilling to stop. It should be noted that the US dollar is not rising out of nowhere, but is doing so amid various negative factors. This makes the current movement doubly illogical.

From a technical perspective, on the hourly timeframe, the situation is straightforward. The price continues to follow a downward trend, supported by a trend line. It not only continues to fall but is moving further away from the trend line. This indicates that the downward movement is very strong and, importantly, stable, occurring almost every day. It remains extremely difficult to pinpoint the reasons behind the market's sudden love for the dollar. This week, the Bank of England will hold a meeting, and we would not be surprised if the market interpreted the results in favor of the American currency.

On the 5-minute timeframe, a decent sell signal was generated at the beginning of the European trading session yesterday, and by the start of the American session, the price reached the nearest target of 1.3050, where profits on sell trades could be taken. A long position could also have been opened, but by the end of the day, there was neither an increase nor a decrease in price.

COT Report

COT reports for the British pound show that in recent years, the sentiment among commercial traders has been constantly changing. The red and blue lines, which represent the net positions of commercial and non-commercial traders, frequently intersect and are generally close to the zero mark. Currently, they are at nearly the same level, indicating a roughly equal number of buy and sell positions.

The dollar continues to fall due to Donald Trump's policies, so, in principle, the demand from market makers for the British pound is not particularly significant at the moment. The trade war will continue in some form for a long time. The Fed will, in any case, reduce the rate in the coming year. Demand for the dollar will decline one way or another. According to the latest report (from September 23) 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. However, this information is long outdated, and there are no new updates.

In 2025, the pound rose significantly, but it should be understood that there is only one reason for this: Trump's policy. Once this reason is mitigated, the dollar may begin to rise, but no one knows when that will happen. The pace of the rise or fall in the pound's net positions is irrelevant. The net position for the dollar is declining in any case, and generally at a faster pace.

Analysis of GBP/USD 1H

On the hourly timeframe, the GBP/USD pair continues to form a downward trend. The dollar still lacks global reasons to strengthen, so we expect the pair to rise toward the highs of 2025 in almost any case. The main thing is for the flat on the daily timeframe to conclude as soon as possible. However, on the hourly timeframe, the current trend is downward; thus, we at least need to wait for a breach of both the trend line and the Senkou Span B line to have technical grounds to anticipate a rise in the British currency.

For November 5, we highlight the following important levels: 1.2863, 1.2981-1.2987, 1.3050, 1.3115, 1.3212, 1.3307, 1.3369-1.3377, 1.3420, 1.3533-1.3548, 1.3584. The Senkou Span B line (1.3290) and the Kijun-sen line (1.3139) can also serve as signals. It is recommended to set a Stop Loss at break-even once the price moves in the right direction by 20 pips. The Ichimoku indicator lines may move throughout the day, which should be taken into account when determining trading signals.

On Wednesday, only the October services sector PMI is scheduled for publication in the UK. In the US, more significant reports are expected, including the ADP report and the ISM services sector index. However, the market already ignored the weak ISM index in the manufacturing sector on Monday. At this time, the market does not care about the reasons for buying dollars.

Trading Recommendations:

Today, traders can trade at the 1.3050 level. Short positions will be relevant if a firm break below 1.3115 occurs, targeting 1.3050. Long positions are theoretically possible if a firm break above the level of 1.3050 occurs, targeting 1.3125.

Explanations for Illustrations:

• Support and resistance price levels are shown as thick red lines, near which the movement may end. They are not sources of trading signals.
• Kijun-sen and Senkou Span B lines are lines from the Ichimoku indicator transferred to the hourly timeframe from the 4-hour timeframe. They are strong lines.
• Extreme levels are thin red lines from which the price previously bounced. They are sources of trading signals.
• Yellow lines are trend lines, trend channels, and any other technical patterns.
• Indicator 1 on COT charts represents the size of each category of traders' net position.