Analysis of GBP/USD 5M
The GBP/USD pair showed a 100-pip increase on Monday without any informational support. The British currency rose by one cent, and that was it. By the end of the day, it was near the descending trendline, and it seems there won't be any issues breaking through this line. Both Ichimoku indicator lines have already been crossed. Ahead of the Bank of England and Federal Reserve meetings, it's clear which direction the market is leaning toward and what it's anticipating. A rebound from the trendline is still possible, but any decline is unlikely to be significant. If today's macroeconomic background is very weak, then we have the UK inflation report and the Fed meeting on Wednesday. There will be plenty of reasons for the market to sell the dollar further.
It's impossible to predict how the pair will move by the end of the week. It's entirely possible that Monday's rise was meant to confuse traders, making them believe the upward trend has resumed. We've often said that the market may have already priced in the entire Fed rate cut cycle. Therefore, surprises from market makers are possible. The market may be deliberately shaken in both directions with increased volatility. At this point, it's extremely difficult to determine which monetary policy factors the market has already accounted for.
The first trading signal of the day was formed overnight, and by the time the European trading session opened, the price had moved quite far from the entry point. So, the only opportunity to enter the market with long positions was at the crossing of the Senkou Span B line when the movement was essentially over. However, making about 20 pips in profit was still possible, which isn't bad either.
COT report:
The COT reports for the British pound show that the sentiment of commercial traders has been subject to frequent changes in recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, constantly intersect and are mainly close to the zero mark. We also see that the last downward trend occurred when the red line was below the zero mark. Therefore, a downturn could be expected around the level of 1.3154, but this assumption will need regular confirmation over time.
According to the latest report on the British pound, the non-commercial group closed 18,700 buy contracts and 900 sell contracts. Thus, the net position of non-commercial traders decreased by 17,800 contracts over the week, but overall, it continues to grow.
The fundamental background still does not provide any grounds for long-term purchases of the pound sterling, and the currency has a real chance to resume the global downtrend. However, an ascending trend line formed in the weekly time frame. Therefore, a long-term decline in the pound should not be expected unless the price breaches this trend line. Despite almost everything, the pound continues to rise. Even when COT reports show that major players are selling the pound, it continues to increase.
Analysis of GBP/USD 1H
In the hourly time frame, GBP/USD continues to correct, but this correction could end at any moment. We still do not see the market rushing to sell the pair and buy the US dollar. Thus, the British currency's baseless and illogical upward trend may resume (or has already resumed). The trendline has not yet been breached, so there are still faint chances of the downward correction continuing.
For September 17, we highlight the following key levels: 1.2605-1.2620, 1.2691-1.2701, 1.2796-1.2816, 1.2863, 1.2981-1.2987, 1.3050, 1.3119, 1.3175, 1.3222, 1.3273, 1.3367. The Senkou Span B line (1.3141) and the Kijun-sen line (1.3108) can also serve as signal sources. Setting the Stop Loss to break even when the price moves in the intended direction by 20 pips is recommended. The Ichimoku indicator lines may shift during the day, which should be considered when determining trading signals.
No significant events are scheduled in the UK on Tuesday; in the US, reports on industrial production and retail sales will be released. But who cares about this data a day before the Fed meeting? On Monday, the pair rose by 100 pips without any news. What more is there to say?
Explanation of illustrations:
Support and resistance levels: Thick red lines near which the trend may end. They are not sources of trading signals.
Kijun-sen and Senkou Span B lines: These Ichimoku indicator lines, transferred from the 4-hour timeframe to the hourly chart, are strong lines.
Extreme levels: Thin red lines from which the price previously bounced. These provide trading signals.
Yellow lines: Trend lines, trend channels, and other technical patterns.
Indicator 1 on COT charts: The net position size for each category of traders.
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