Analysis of GBP/USD 5M

GBP/USD showed absolutely absurd movements on Friday. They were identical to those shown by the EUR/USD pair. The dollar initially rose after strong U.S. labor market and unemployment data, but then it quickly returned to its original positions. All the movements on Friday and throughout the entire week practically had no impact on the technical picture. The fact is the pound has been in a flat state for the past 4 months. It is clearly visible on the 24-hour timeframe. Therefore, the price can move however it wants within the flat phase (approximately between the levels of 1.25 and 1.28). The Ichimoku indicator lines have no power. The price being above or below them does not indicate any trend.

There are only two options left. Either wait for the flat to end or trade on the smallest timeframes. The first option is bad because no one knows how long one needs to wait. The flat phase has already lasted for 4 months, and it could last for another 4. The second option is bad because not only is it a flat, but a low-volatility flat. The pair typically moves by 50-60 pips per day, so it is very difficult to expect good profits. And if we add the multiple signals that simply do not work properly due to low volatility, then it becomes quite disheartening. But the most important thing is for traders to clearly understand what to expect from the pair at the moment. Understanding this will help avoid losses.

The trading signals on Friday left much to be desired. Initially, the pair bounced off the level of 1.2620, then surpassed the area of 1.2605-1.2620, and then returned back above it. In all three cases, the price moved in the intended direction by 10-20 pips, no more. Thus, the first trade closed with a small profit because it should have been manually closed before the Nonfarm Payrolls report. The second signal was executed, but the trade closed at breakeven. The third signal should not have been executed anymore because the first two turned out to be a false signal.

COT report:

COT reports on the British pound show that the sentiment of commercial traders has frequently changed in recent months. The red and blue lines, which represent the net positions of commercial and non-commercial traders, constantly intersect and, in most cases, remain close to the zero mark. According to the latest report on the British pound, the non-commercial group opened 7,000 buy contracts and closed 1,100 short ones. As a result, the net position of non-commercial traders increased by 8,100 contracts in a week. The fundamental background still does not provide a basis for long-term purchases of the pound sterling, and the currency remains in a sideways channel.

The non-commercial group currently has a total of 98,300 buy contracts and 55,000 sell contracts. The bulls no longer have a significant advantage. Although the pound refuses to fall, such baseless movements cannot last forever. The technical analysis also suggests that the pound should fall further (descending trend line), but we still have a flat phase on the 24-hour timeframe.

Analysis of GBP/USD 1H

On the 1H chart, GBP/USD has started a new upward movement within the sideways trend on the 24-hour timeframe. We still expect the pound to fall further, however, as long as the sideways trend persists, the pair will either rise or fall, unrelated to news and reports. Last week, the fundamentals and macroeconomics were much more supportive of the dollar, and yet the pound traded higher. There is no logic behind the pair's movements right now.

As of April 8, 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, 1.2786, 1.2863, 1.2981-1.2987. The Senkou Span B line (1.2670) and the Kijun-sen line (1.2610) 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.

There are no important events scheduled on Monday. Therefore, we don't expect the currency pair to show more logical movements or higher volatility than what we have already become accustomed to. The pair remains in a sideways channel on the 24-hour timeframe, and that's all there is to it.

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;