GBP/USD 5-Minute Analysis

The GBP/USD currency pair continued to rise on Tuesday, even in the absence of significant macroeconomic events that day. The pound has been climbing for several weeks now, demonstrating on both Monday and Tuesday that its current growth seems illogical. Last week, we noted that the pound had risen excessively compared to the prevailing fundamental and macroeconomic conditions. However, the recent movements appear unrelated to logic or technical analysis. The market is effectively dumping the U.S. dollar, likely in response to actions taken by Donald Trump on the international stage. Any new decision from Trump could trigger another decline in the dollar's value, as the market is clearly expressing its discontent with the U.S. president's policies.

From a technical perspective, the pound's current growth is also without foundation. The pair has broken above the ascending trend lines twice, yet a decline has not occurred. Why is this the case? Has the British economy suddenly sped up? Has the American economy started to slow down? Have the Bank of England or the Federal Reserve altered their monetary policies? The answer is no; the only constant remains the same, as previously mentioned.

On the 5-minute timeframe, two significant trading signals were generated for the pound on Tuesday. First, the pair managed to break through the 1.2691-1.2701 area, albeit with some difficulty, and later, during the U.S. trading session, it bounced off the same level. In both instances, traders could have opened long positions, but the nearest target level was quite distant. Furthermore, it feels uncomfortable to pursue long positions when there are no clear reasons for doing so, especially given the pound's continuous rise over the past few weeks.

COT Report

COT reports for the British pound indicate that commercial traders' sentiment has been fluctuating significantly in recent years. The red and blue lines, which represent the net positions of commercial and non-commercial traders, often intersect and generally hover near the zero mark. Currently, they are close to each other, suggesting a roughly equal number of long and short positions.

On the weekly timeframe, the price initially broke through the 1.3154 level and subsequently declined to the trend line, which was also breached. This break of the trend line implies that the pound's decline is likely to continue. However, there was a rebound from the previous local low on the weekly chart, which may indicate a range-bound movement.

The latest COT report on the British pound shows that the non-commercial group opened 500 BUY contracts and closed 4,500 SELL contracts. As a result, the net position of non-commercial traders increased by 5,000 contracts over the week, though this change does not significantly bolster the pound.

The fundamental backdrop still does not justify long-term purchases of the pound, and the currency remains at risk of continuing its long-term downtrend. Therefore, the net position may decline, signaling reduced demand for the British pound.

GBP/USD 1-Hour Analysis

On the hourly timeframe, the GBP/USD pair completed an upward trend forming for weeks, only to immediately start a new one. This may not be the last trend change within the ongoing upward correction on the daily timeframe. However, we still do not see any long-term justification for the pound's growth. The only factor working in favor of the pound right now is Trump, who seems to be using unconventional methods to weaken the U.S. dollar—something he has long desired.

For March 5, we highlight the following key levels: 1.2237-1.2255, 1.2331-1.2349, 1.2429-1.2445, 1.2511, 1.2605-1.2620, 1.2691-1.2701, 1.2796-1.2816, 1.2981-1.2987. The Senkou Span B (1.2637) and Kijun-sen (1.2654) lines may also serve as sources of trading signals. The Stop Loss level should be moved to breakeven if the price moves 20 pips in the correct direction. The Ichimoku indicator lines may shift throughout the day, so this should be considered when determining trading signals.

On Wednesday, business activity indices in the services sector will be released in the U.K. and the U.S. The U.S. dollar will need very strong data to regain strength. Meanwhile, Trump could easily trigger another dollar collapse—for example, if he announces new tariffs against the EU or the U.K.

Illustration Explanations:

• Support and Resistance Levels (thick red lines): Thick red lines indicate where movement may come to an end. Please note that these lines are not sources of trading signals.
• Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the 4-hour timeframe to the hourly timeframe. These are strong lines.
• Extreme Levels (thin red lines): Thin red lines where the price has previously bounced. These serve as sources of trading signals.
• Yellow Lines: Trendlines, trend channels, or any other technical patterns.
• Indicator 1 on COT Charts: Represents the net position size for each category of traders.