Analysis of GBP/USD 5M

Yesterday, GBP/USD exhibited low volatility despite the release of a key UK inflation report. However, we were not surprised at all. Firstly, the British currency managed to appreciate again, even though inflation in the UK has already fallen to the Bank of England's target level. Secondly, the market's reaction was so muted, it was as if there were no important events throughout the day at all. Therefore, it was clear that the pound chose to show illogical movement once again, which has been the trend over the past six months.

So what else can we say about the pound and its movements? In general, our confidence in two things only grows with each passing day. First, there are major market makers behind the pound, and they prevent the British currency from moving in the direction suggested by fundamental and macroeconomic factors. Second, the pound will eventually decline, but it will start when no one expects it, which will come as a shock to many market participants. The BoE meeting will take place today, and theoretically, the British central bank could lower the key interest rate. If this happens, the pound should go through a sharp decline. However, considering what the market has done over the past six months, we strongly doubt such a scenario.

Only one trading signal was formed on Wednesday. At the very beginning of the European trading session, the price bounced off the level of 1.2701, after which it managed to climb about 35 pips. It would have been convenient to close the long position at any time since no further significant signals were formed.

COT report:

COT reports on the British pound show that the sentiment of commercial traders has frequently changed in recent years. The red and blue lines, which represent the net positions of commercial and non-commercial traders, constantly intersect and generally remain close to the zero mark. According to the latest report on the British pound, the non-commercial group opened 8,100 buy contracts and closed 700 short ones. As a result, the net position of non-commercial traders increased by 8,800 contracts over the week, which is quite significant for the pound. Thus, sellers failed to seize the initiative at the most critical moment.

The fundamental background still does not provide a basis for long-term purchases of the pound sterling, and the currency has a good chance to resume the global downward trend. However, the price has already breached the trend line on the 24-hour timeframe at least twice. The level of 1.2765 is currently preventing the pound from rising further.

The non-commercial group currently has a total of 110,300 buy contracts and 58,200 sell contracts. The bulls have taken the initiative, but aside from the COT reports, there is nothing else that suggests a potential rise in the GBP/USD pair.

Analysis of GBP/USD 1H

On the 1H chart, GBP/USD tried to start a new downward movement, but so far it seems that this will quickly come to an end, just like the previous attempts. The price may consolidate above the 1.2691-1.2701 area, which will mean that it is ready to continue the upward movement. We can expect a bearish reversal near the Ichimoku indicator lines, but it is impossible to predict the pair's movements on Thursday, as yesterday has already made that clear. The pair can move in any direction, even upwards.

As of June 20, we highlight the following important levels: 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2516, 1.2605-1.2620, 1.2691-1.2701, 1.2796, 1.2863, 1.2981-1.2987. The Senkou Span B (1.2773) and Kijun-sen (1.2757) lines can also serve as sources of signals. Don't forget to set a Stop Loss to breakeven if the price has moved in the intended direction by 20 pips. The Ichimoku indicator lines may move during the day, so this should be taken into account when determining trading signals.

On Thursday, traders await the results of the BoE meeting, and the Monetary Committee's vote on the interest rate. Theoretically, even if the number of doves increases from 2 to 3 or 4, this will be enough for the pound to fall. Not to mention a rate cut on the table. However, the pound refuses to fall, and the market does not want to sell it either. Therefore, GBP/USD could even rise today.

Description of the chart:

Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;

The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;

Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;

Yellow lines are trend lines, trend channels, and any other technical patterns;

Indicator 1 on the COT charts is the net position size for each category of traders;