Analysis of GBP/USD 5M

The GBP/USD currency pair showed no growth or decline on Wednesday. The price remained firmly above the Ichimoku indicator lines and the 1.3369-1.3377 range, and these levels/lines provide support. However, the main point is not the lack of dollar growth, but rather the absence of growth in the British currency. As we can see, the intensity of hostilities and missile strikes in the Middle East has decreased over the past week, and reports of possible negotiations have started to emerge. However, this information does not significantly help risk currencies and assets, because the market no longer believes in empty promises or various forms of insider information. Therefore, Donald Trump can talk about deals and ceasefires every day, but as long as Iran opposes categorically, the demand for the dollar will remain high.

From a technical perspective, the British pound still has an upward trend, but it is even weaker and more uncertain than the euro. Yesterday, a rather important inflation report was published in the UK, which indicated a slight acceleration of the core indicator, allowing the market to buy the pound. However, we did not see any purchases of the pound because the market is now more concerned with March inflation than with February's. Geopolitical factors currently do not allow the British currency to expect serious strengthening.

On the 5-minute timeframe, three practically identical trading signals were formed yesterday. During the European trading session, the price bounced twice from the 1.3369-1.3377 area, and during the American session, once more. The first two signals duplicated each other, and one trade could have been opened based on them. However, the target level of 1.3437 could not be reached. The "American signal" proved very weak and failed to provoke a noticeable increase in the pair.

COT Report

COT reports for the British pound show that in recent years, the sentiment among commercial traders has been constantly changing. The red and blue lines, representing the net positions of commercial and non-commercial traders, continually cross each other and are often close to the zero mark. Currently, the lines are diverging, with non-commercial traders still dominating with... sales. Given the events in the Middle East, it is no longer surprising that the demand for risk currencies is declining while the demand for the dollar is increasing.

In the long term, the dollar continues to decline due to Trump's policies, as shown on the weekly timeframe (illustration above). The trade war will continue in one form or another for a long time, and the Fed will, in any case, resume easing monetary policy. Demand for the dollar will decline in the future, one way or another. However, geopolitical factors are currently at the forefront, providing strong support for the American currency. According to the latest COT report (dated March 17), the "Non-commercial" group closed 4,900 BUY contracts and 23,700 SELL contracts. Thus, the net position of non-commercial traders increased by 18,800 contracts over the week.

Analysis of GBP/USD 1H

On the hourly timeframe, the GBP/USD pair began to rise, breaking the downward trend, and has a real chance of recovering losses over the past one and a half months. However, the upward movement is extremely weak, as the market continues to closely monitor events in the Middle East. Despite the strong decline of the pair in February-March, we still consider it a correction in the long-term plan. The daily timeframe confidently signals the preservation of the upward trend. Unfortunately, the geopolitical situation remains quite heavy, so the British pound is hardly increasing.

For March 26, we highlight the following important levels: 1.3096-1.3115, 1.3201-1.3212, 1.3369-1.3377, 1.3465-1.3480, 1.3533-1.3548, 1.3615, 1.3671-1.3681, 1.3751-1.3763. The Senkou Span B line (1.3350) and the Kijun-sen line (1.3368) can also be sources of signals. The Stop Loss level is recommended to be set to breakeven when the price moves in the correct direction by 20 pips. The Ichimoku indicator lines may move during the day, which should be taken into account when determining trading signals.

On Thursday, there are no major events or reports scheduled in the UK, while the only scheduled report in the US will cover unemployment benefit claims. Thus, today we should not expect strong trending movements unless discouraging information comes from the Middle East.

Trading Recommendations:

Today, traders can open short positions if the price consolidates below the 1.3350-1.3377 area, with a target of 1.3201-1.3212. Long positions will become relevant with a target of 1.3456-1.3480 if the price bounces off the 1.3350-1.3377 area.

Explanations for Illustrations:

Support and resistance price levels (resistance/support) are thick red lines near which movement may end. They are not sources of trading signals.

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

Extreme levels are thin red lines from which the price has previously bounced. They are sources of trading signals.

Yellow lines indicate trend lines, trend channels, and any other technical patterns.

Indicator 1 on COT charts represents the size of the net position for each category of traders.