GBP/USD 5-Minute Analysis

The GBP/USD currency pair continued its upward movement on Tuesday. As previously mentioned, the break of the trendline could potentially be a false signal. Donald Trump has provoked significant volatility in the foreign exchange market, which does not align well with the current technical analysis. It's best to disregard Monday's fluctuations as if they never occurred. By doing so, we see that the price remains above the trendline, maintains its upward trend on the hourly timeframe, and continues to correct on the daily timeframe.

On Tuesday, GBP traders also received the JOLTs report on job openings for December, which came in worse than expected and contributed to a further decline in the dollar. While we don't view the JOLTs report as particularly significant, the pair is currently technically positioned for an uptrend. Therefore, any news that supports this upward movement is well-received by the market. With no new disruptive information from Donald Trump on Tuesday, the market had a chance to act logically.

On the 5-minute timeframe, the pair generated two trading signals. First, it rebounded from the 1.2429-1.2445 area, and then it broke through this range along with the Kijun-sen line. The first signal was false; however, the pair moved 20 pips in the intended direction, likely triggering a breakeven Stop Loss. The second signal presented a trading opportunity, allowing the position to be closed at a small profit by evening. It's important to remember that the ongoing upward movement over the past few weeks is corrective in nature.

COT Report

COT reports on the British pound indicate that the sentiment among commercial traders has been consistently shifting in recent years. The red and blue lines, which represent the net positions of commercial and non-commercial traders, often intersect and remain close to the zero mark. Currently, these lines are near each other, suggesting an approximately equal number of long and short positions.

On the weekly timeframe, the price initially broke through the 1.3154 level before dropping to the trendline, which it subsequently breached. This break suggests that the decline of the pound is likely to continue. However, it's important to note the rebound from the penultimate local low seen on the weekly timeframe, indicating that we might be experiencing a flat market.

The most recent report on the British pound shows that the non-commercial group closed 16,400 buy contracts and 2,900 sell contracts. As a result, the net position of non-commercial traders decreased by another 13,500 contracts over the week, which does not bode well for the pound.

The fundamental backdrop continues to lack support for long-term purchases of the British pound, with the currency facing a real possibility of continuing its global downtrend. Hence, the net position may continue to decline, indicating a further decrease in demand for the pound.

GBP/USD 1-Hour Analysis

On the hourly timeframe, the GBP/USD pair continues to exhibit a local uptrend, even though it has broken the trendline. Currently, there are no fundamental reasons for the British pound to appreciate in the long term. However, given the bullish short-term trend, it may be advisable to consider long positions on lower timeframes. In contrast, on higher timeframes and in the long term, we do not recommend taking long positions, as the pound's position lacks fundamental stability. This week, the pair could experience increased volatility due to the upcoming Bank of England meeting and significant U.S. economic data releases.

For February 5, we highlight the following key levels: 1.2052, 1.2109, 1.2237-1.2255, 1.2349, 1.2429-1.2445, 1.2511, 1.2605-1.2620, 1.2691-1.2701, and 1.2796-1.2816. The Senkou Span B line at 1.2340 and the Kijun-sen at 1.2361 may also serve as significant indicators. It is recommended to set the Stop Loss to breakeven after the price moves 20 pips in the favorable direction. Please note that the Ichimoku indicator lines may shift throughout the day, which should be taken into account when identifying trading signals.

On Wednesday, the UK will release its Services PMI, while the more significant ISM Services Index will be published in the U.S. Additionally, the ADP Employment Report will be released, which is also of considerable importance. We believe the market may experience a pullback today, as the recent upward movement appears to be a correction on the daily timeframe, and corrections often display choppy internal movements.

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.