Analysis of GBP/USD on the M5 chart

On Thursday, the GBP/USD pair saw a significant surge in value. The impressive increase came after the release of US inflation data for October. The consumer price index slowed down to 7.7% in October, showing a steep decline and triggering a collapse in the US dollar. The market rushed to sell the greenback after it became clear that the US Federal Reserve was unlikely to hike rates at the same pace any further. Although the sterling has had no long-term growth prospects, the technical and fundamental pictures are slowly changing, with a rise in demand for risk assets. The ascending trend line has been formed, and the pound has approached the area of 1.1700. With the release of important macro data in the United Kingdom, a bearish correction may occur, which is much needed after yesterday's growth. Therefore, the pair may well be in a downtrend today.

Interestingly, a single trading signal for GBP was generated yesterday. It was made some 5-10 minutes before the US inflation statistics came. Those who used this signal to open trades should have placed a Stop Loss order at a distance of around 20-30 points. Traders who did that were able to gain about 200 pips of profit. It made no sense to enter the market afterward, as signals were produced quickly and the price skyrocketed.

Commitments of Traders:

The latest COT report on GBP logged a slight decrease in bearish sentiment. In a week, Non-commercial traders closed 8,500 long positions and 11,500 short positions. The non-commercial net position grew by 3,000. The net position has advanced in recent weeks, but the sentiment remains noticeably bearish. So, the pound is likely to remain in a downtrend in the medium term. Based on COT data, we can hardly expect a surge in price. Indeed, the market is now mainly engaged in USD purchases. Non-commercial traders now keep some 34,000 long positions and 79,000 short positions opened. As we can see, there is a wide gap between them. As it turns out the euro is now unable to show growth when market sentiment is bullish, while the pound is able to rise when sentiment is bearish. When it comes to the total number of long and short positions, here bulls have an advantage of 21,000 positions. Still, this is not enough for the sterling to increase. Anyway, the British currency is unlikely to rise in the long term although the technical picture shows otherwise.

Analysis of GBP/USD on the H1 chart

In the 1-hour time frame, GBP/USD moves in such a way that it is hard to determine the current trend. Yesterday, the movement became clearer, and the ascending trend line appeared on the chart. Therefore, traders may expect the pair to go up, although it is still hard to believe. On November 11th, signals may be made at 1.1354, 1.1486, 1.1645, 1.1760, 1.1874, and 1.1974-1.2007. Senkou Span B(1.1394) and Kijun-sen(1.1470) lines may also generate signals. Pullbacks and breakouts through these lines may produce signals as well. A Stop Loss order should be set at the breakeven point after the price passes 20 pips in the right direction. Ichimoku indicator lines may move during the day, which should be taken into account when determining trading signals. In addition, the chart does not illustrate support and resistance, which could be used to lock in profits. On Friday, the United Kingdom will see the release of data on industrial production and Q3 GDP. The results will hardly affect the market, although economic growth may show a contraction in the third quarter. This would harm the pound. In the United States, Michigan consumer sentiment will be released.

Chart explanations:

Resistance/support are thick red lines near where movements can stop. They do not generate any trading signals.

Kijun-sen and Senkou Span B lines are the Ichimoku indicator lines transferred to the 1-hour timeframe from the 4-hour timeframe. They are also strong lines.

Extreme levels are thin red lines where prices used to bounce. They 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.