Analysis of GBP/USD 5M
On Monday, GBP/USD's decline was still in progress. If we recall, at the end of last week, the pound had a good reason to show more bearish bias. But yesterday, in the absence of influential events, there was no distinct reason behind its decline. However, if we look at the big picture, there are plenty of reasons for the British currency to fall. We already mentioned that we expect the pound to fall after the Bank of England meeting, as we didn't expect the British currency to receive any support from the British central bank. As we can see, we were right, and the pound continues to fall even on days when it could stall. This is because the pound has appreciated too much in the past 12 months, and now it is time for a correction, as we have been saying since the beginning of 2023.
No trading signals were formed on Monday. Throughout the day, the price simply did not come close to any of the levels or lines. And as a result, traders had no reason to enter the market. Volatility was only 56 pips, which is quite low, and it turns out that the pound was trading much weaker than the euro, which is not common. Nevertheless, the pound continues to fall, and that's what counts.
COT report:
According to the latest COT report on GBP/USD, the Non-commercial group closed 12,300 long positions and opened 200 short positions. Thus, the net position of non-commercial traders decreased by 12,500 contracts over the week. The net position indicator has been steadily increasing over the past 12 months, but the pound sterling has started to fall in the last two months, which we have been anticipating for so many months now. Perhaps we are at the very beginning of a protracted downtrend. At least in the coming months, we do not see any bullish prospects for the pound.
The British currency has jumped by a total of 2,800 pips from its absolute lows reached in 2022. All in all, it has been a stunning rally without a strong downward correction. Thus, further growth would be utterly illogical. We're not against the upward trend. We just believe GBP/USD needs a good downward correction first and then assess the factors supporting the dollar and the pound. A correction to the level of 1.1844 would be enough to establish a fair balance between the two currencies. The Non-commercial group currently holds a total of 85,000 longs and 51,400 shorts. The bears have started to take the initiative in recent weeks, and we believe that this trend will continue in the near future.
Analysis of GBP/USD 1H
On the 1H chart, GBP/USD continues its weak downward movement, losing ground almost every day. The pound sterling is still poised to decline and can't correct upwards. Both central bank meetings weighed on the pound. This turn of events seems entirely reasonable, and it's just as we mentioned, the only logical next step would be for the pound to fall. The trend line remains relevant, and the price is below all the Ichimoku indicator lines. So what else is needed to determine the trend?
On September 26, traders should pay attention to the following key levels: 1.1927-1.1965, 1.2143, 1.2188, 1.2269, 1.2349, 1.2429-1.2445, 1.2520, 1.2605-1.2620, 1.2693, 1.2786. The Senkou Span B (1.2456) and Kijun-sen (1.2308) lines can also be sources of signals, e.g. rebounds and breakout of these levels and lines. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 20 pips. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits.
On Tuesday, the event calendars for both the UK and the US are almost empty. More precisely, there will be nothing interesting in the UK, and in the US, there are a couple of secondary events that are unlikely to elicit any significant reaction. Therefore, the pound may continue to gradually fall.
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;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.
