Analysis of GBP/USD 5M
GBP/USD also traded with low volatility on Monday but showed a trend (intraday) movement during the day. On a higher timeframe, this movement looks like a correction against the weekly decline. Therefore, from a technical perspective, the pound's movement has been weak but it's still a trend. Therefore, in the near future, we can expect a new downward movement since the pair has moved towards a critical line as part of its corrective move. A shallow consolidation above this line should not mislead you. The Ichimoku indicator lines are currently quite weak (the same goes for the euro), and the price can easily overcome them. In the absence of economic reports and a fundamental background, we believe that the pair's movements were just part of a technical correction.
We didn't even highlight any trading signals on Monday. The price traded between the levels of 1.2215 and 1.2269 for almost the entire day. The Kijun-sen and Senkou Span B lines ran between these levels. In other words, as soon as a new signal was forming, the price immediately found itself near the next level or line, with very little distance between them. Therefore, there was no point in entering the market in this area. The pound's volatility was 66 points, which is very low. The pound refuses to stand still but its movements have been weak.
COT report:
COT reports on the British pound also align perfectly with what's happening in the market. According to the latest report on GBP/USD, the non-commercial group closed 3,400 long positions and 1,700 short ones. Thus, the net position of non-commercial traders decreased by another 1,700 contracts in a week. The net position indicator has been steadily rising over the past 12 months, but it has been firmly decreasing over the past three months. The British pound is also losing ground. We have been waiting for many months for the sterling to reverse downwards. Perhaps GBP/USD is at the very beginning of a prolonged downtrend. At least in the coming months, we do not see significant prospects for the pound to rise, and even if we're currently witnessing a corrective phase, it could persist for several months.
The British pound has surged by a total of 2,800 pips from its absolute lows reached last year, which is an enormous increase. Without a strong downward correction, a further upward trend would be entirely illogical (if it is even planned). We don't rule out an extension of an uptrend. We simply believe that a substantial correction is needed first, and then we should assess the factors supporting the US dollar and the British pound. A correction to the level of 1.1844 would be enough to establish a fair balance between the two currencies. The non-commercial group currently holds a total of 63,700 longs and 85,800 shorts. The bears have been holding the upper hand in recent months, and we believe this trend will continue in the near future.
Analysis of GBP/USD 1H
On the 1H chart, GBP/USD has finally formed an uptrend, which could serve as a convincing conclusion to the bullish correction, which has been ongoing for more than a month. The pair has started to fall, and it may be the start of a new downtrend. However, at the moment, the pair is correcting higher, and the Ichimoku indicator lines are weak. Therefore, we are waiting for the end of the bullish correction and the decline to resume.
As of November 14, we highlight the following important levels: 1.1760, 1.1874, 1.1927-1.1965, 1.2052, 1.2109, 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2520, 1.2605-1.2620, 1.2693. Senkou Span B (1.2257) and Kijun-sen (1.2247) lines can also be sources of signals. Signals can be "bounces" and "breakouts" of these levels and lines. It is recommended to set the Stop Loss level to break-even when the price moves in the right direction by 20 pips. The Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. The illustration also includes support and resistance levels that can be used to lock in profits from trades.
On Tuesday, the UK will release reports on wages and unemployment. These are quite important and interesting data. The main agenda for the day will be the US inflation report for October. Perhaps the market will not show a significant reaction, but we can still hope.
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;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.
