M5 chart of GBP/USD
On Friday, the GBP/USD pair traded sideways in the range between 1.2342 and 1.2429. Due to the lack of important macro releases during the day, we also saw no trend movements intraday. Overall, volatility totaled 70 pips. Clearly, the market started bracing for the new trading week already on Friday. Therefore, it traded so coolly. Let's hope this week does not disappoint. Its macroeconomic calendar will be empty on Monday and Tuesday but with some important events Wednesday through Friday. Therefore, the flat market is likely to continue at the beginning of the week. At this point, it remains to be seen whether the pair will be able to extend growth or a reversal will occur. A lot will depend on the Bank of England's interest rate decision and Governor Bailey's rhetoric. We are still expecting a bearish correction of 500 to 600 pips.
Three trading signals were made on Friday. During the day, the price hovered around the important line. Traders were lucky enough that the Kijun-sen was near the lower limit of the intraday range and not somewhere in the middle. We received a few buy signals, but the price failed to test the target level. Any trade closed either by Stop Loss at the breakeven point or with a small profit if closed manually.
COT report:
The latest COT report showed a decrease in bearish sentiment. In a week, non-commercial traders closed 6,700 long positions and 7,500 short positions. The net non-commercial position grew by 800. The net non-commercial position has been on the rise in recent months. The sentiment of large traders may soon turn bullish. Although the pound sterling has been bullish against the greenback in recent months, its growth can hardly be explained with the help of fundamental analysis. We should not rule out the possibility that the pound may fall against the dollar in the medium term as a correction is needed. Overall, the latest COT reports have been in line with the pair's movement. Since the net position is not bullish yet, the buying spree may go on for several months more. Non-commercial traders now hold 35,000 long positions and 59,000 short ones. We are still skeptical about the pair being bullish in the long term although there are technical reasons for that. However, in terms of fundamentals and geopolitics, this will unlikely be a strong and fast uptrend.
H1 chart of GBP/USD
In the H1 time frame, GBP/USD is still moving in the sideways channel. Although the Ichimoku lines are not so strong now, we still marked their latest positions. That will prevent us from receiving multiple false signals around them. Expecting a downtrend, we are now waiting for the price to break both Ichimoku lines. However, in this case, US macro data should come upbeat and the Bank of England's decision should be dovish to the maximum. On January 18, important levels are seen at 1.2106, 1.2185, 1.2288, 1.2342, 1.2429-1.2458, 1.2589, 1.2659. Senkou Span B (1.2268) and Kijun-sen (1.2344) may also generate signals when the price either breaks or rebounds from these levels. Don't forget to place a stop-loss order at the breakeven point when the price passes 20 pips in the right direction. Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. There are also support and resistance although no signals are made near these levels, which can be used for locking in profits. On Monday, due to the lack of macro events in the UK and the US, the flat market is likely to go on. The release of macro data and the meetings of central banks are to take place later during the week.
Indicators on charts:
Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals.
The Kijun-sen and Senkou Span B lines are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines.
Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals.
Yellow lines are trend lines, trend channels, and any other technical patterns.
Indicator 1 on the COT chart is the size of the net position of each trader category.
Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.
