Analysis of GBP/USD 5M

The GBP/USD currency pair continued its downward movement on Monday. After four full days of one-sided downward movement, breaking the Ichimoku indicator lines and the trendline, such movement comes as no surprise. Now, even from a technical perspective, the decline seems more logical and probable. The British pound has once again failed to establish any discernible upward trend, but traders should have become accustomed to this over the past two months. The US dollar continues to rise solely on geopolitical factors. On Monday, there was no macroeconomic backdrop in the UK or the US; thus, the only trigger for a new rise in the dollar could have been further statements from Donald Trump, who once again amazed the world with his contradictions. However, the market has long stopped believing Trump. It is waiting for new hostilities and escalation in the Middle East. Incidentally, Iran itself intends to declare war on Turkey.

Therefore, as long as the war in the Middle East does not move toward de-escalation, it is unlikely that we will see a decline in the US currency. Tensions in and around Iran must at least ease a bit for investors to stop constantly fleeing risk. This week, numerous important reports will be published in the US, but even if they are unlikely to provoke a significant decline in the dollar, let alone a trend.

On the 5-minute timeframe on Monday, only one trading signal was generated after most of the downward movement had already occurred. Thus, traders had the opportunity to open a short position, and the pair's decline may well continue on Tuesday.

COT Report

COT reports for the British pound show that commercial traders' sentiment has fluctuated over the years. The red and blue lines representing the net positions of commercial and non-commercial traders frequently cross 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 not surprising that demand for risk currencies is falling and demand for the dollar is rising.

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 is, in any case, closer to resuming monetary policy than the ECB or the Bank of England, due to the eternal pressure from Trump and a leadership change expected in May. However, geopolitical factors are currently paramount, providing significant support to the US dollar. According to the latest COT report (dated March 24), the "Non-commercial" group opened 2,200 BUY contracts and closed 4,900 SELL contracts. Thus, the net position of non-commercial traders increased by 7,100 contracts over the week.

Analysis of GBP/USD 1H

On the hourly timeframe, the GBP/USD pair has transitioned to forming a new downward trend. The market continues to closely monitor events in the Middle East, which are driving the persistent strengthening of the US currency. Despite the sharp decline of the pair in February and March, we still view it as a correction in the long-term perspective (weekly timeframe). The daily timeframe confidently signals the persistence of an upward trend. Unfortunately, geopolitics remains quite heavy, so the British pound is hardly rising.

On March 31, we identified 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 (1.3347) and Kijun-sen line (1.3303) may also serve as sources of signals. It is advisable to set a Stop Loss at a breakeven point once the price moves 20 pips in the desired direction. The Ichimoku indicator lines may shift during the day, which should be considered when determining trading signals.

On Tuesday, the UK is scheduled to release its third GDP report for the fourth quarter, and the US will publish the JOLTs report on open vacancies for February. Theoretically, these reports could provoke a slight market reaction, but this reaction is unlikely to affect the overall technical picture.

Trading Recommendations:

Today, traders may open short positions if the price consolidates below the 1.3201-1.3212 range, with a target of 1.3096-1.3115. Long positions will become relevant with a target of 1.3303 if the price consolidates above the 1.3201-1.3212 range.

Explanations for Illustrations:

• Support and Resistance price levels – thick red lines, near which the movement may end. They are not sources of trading signals.
• Kijun-sen and Senkou Span B lines – lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour frame. They are strong lines.
• Extremum levels – thin red lines from which the price has previously bounced. They are sources of trading signals.
• Yellow lines – trendlines, trending channels, and any other technical patterns.
• Indicator 1 on COT charts – the size of the net position of each category of traders.