Analysis of GBP/USD 5M

GBP/USD tried to resume its downward movement on Tuesday, but failed on this attempt. The price has been ignoring the important area of 1.2691-1.2701 for the past two days. This area had previously prevented the British currency from falling for several consecutive weeks. However, it appears that the market refuses to pay attention to technical signals, levels, or the fundamental and macroeconomic background. Today will show us whether the market is finally prepared to fairly react to the news reports, or if the pound will rise again due to formal factors.

The UK economic calendar was empty on Tuesday, while the U.S. published two reports. Industrial production turned out to be better than expected, but the retail sales figure missed forecasts. A small spike in activity was observed following these reports, which were released at different times, but overall, the pair's volatility was only around 50 pips. Therefore, it's hard to say that the macroeconomic background had a significant impact on the pair's movement. However, this no longer matters. The UK inflation report will be released on Wednesday, and the Bank of England meeting is scheduled for Thursday. The pound will either start a logical decline, or it will show an illogical rise. The British currency even has room to grow within a correction. If UK inflation slows down less than expected, the pound will likely rise.

Two trading signals were formed on Tuesday. First, the pair consolidated below the area of 1.2691-1.2701 and failed to continue moving downward, and then it consolidated above this area and failed to move upwards. In the first case, the trade could have been closed with a Stop Loss to breakeven, while in the second case, a small loss was most likely incurred. Overall, the pound continues to move sideways in a very chaotic manner. This is clear on almost all the timeframes.

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 appears that this is bound to quickly end, just like the previous attempts. The price may consolidate above the 1.2691-1.2701 area, which will mean that it will continue to rise towards the Ichimoku indicator lines. We can expect a bearish reversal around this line, but it is impossible to predict the pair's movements on Wednesday and Thursday. The pair can move in any direction, even upwards.

As of June 19, 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 Wednesday, the key focus is on the UK inflation report, and it's impossible to predict how the market will react. However, we don't expect a very strong movement from the pair since the market tends to react much more strongly to U.S. inflation than to UK inflation. Nevertheless, this report will show traders when they can expect the first BoE rate cut. However, this information is unlikely to help the pair start a downward movement.

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;