Analysis of GBP/USD 5M
GBP/USD showed a bullish bias on Wednesday and Thursday. Similar to the euro, the British pound failed to break through the support area of 1.2605-1.2620 thrice. Also, remember that this is actually the first support area the dollar needed to deal with to continue its growth. However, all the US dollar could manage to do was a correction within a correction, within a flat, and within another flat. To clearly understand the pound's movement, one should simply switch to the 24-hour timeframe.
There were no interesting events in the UK, and the US was observing a holiday. Nonetheless, the pound kept crawling higher all day, as if there was no other possible direction. Thus, the British pound ended the downward trend, when it hardly even started it. On the daily timeframe, where you can at least roughly understand the current direction of movement, two possible scenarios are visible. The first is that we are still within a horizontal channel between the levels of 1.23 and 1.28. The second is that a new upward trend began on April 22, which started back in September 26, 2022. After the pair failed to form a significant downward movement for nine months, and the market continues to ignore all factors supporting the dollar, we are ready to consider this scenario. Currently, the price has once again hit the level of 1.2763, from which it has previously bounced at least ten times.
There were no trading signals on the 5-minute timeframe, and volatility was just 27 pips. This is all you need to know about the pair's movements on Thursday.
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 mostly remain close to the zero mark. According to the latest report on the British pound, the non-commercial group closed 3,400 buy contracts and opened 200 short ones. As a result, the net position of non-commercial traders decreased by 3,600 contracts over the week. Thus, sellers failed to seize the initiative.
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 1.2800 (which is the upper boundary of the sideways channel) is currently preventing the pound from rising further.
The non-commercial group currently has a total of 102,400 buy contracts and 58,500 sell contracts. The bulls are taking the lead in the market, but aside from the COT reports, nothing else suggests a potential rise in the GBP/USD pair. Such a strong advantage suggests that the pair may fall...
Analysis of GBP/USD 1H
On the 1H chart, GBP/USD failed to overcome the 1.2605-1.2620 area. A new rebound from this area triggered another round of the corrective movement. We expect the pound to fall in the medium-term, but the market is not interested in selling the pound regardless of the fundamental background. If the pair firmly overcomes the 1.2763 level on the daily and weekly timeframes, we will consider the possibility of prolonging the upward trend. In general, the pound shows erratic movements and volatility is weak.
As of July 5, 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 (1.2675) and Kijun-sen (1.2696) 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 Friday, there are no significant events scheduled in the UK, while the US will release important data on NonFarm Payrolls, unemployment, and wages. For some reason, it seems that the dollar will not be able to rise today. If the US data turns out to be weak again, the pound will continue to rise.
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;
