Analysis of GBP/USD 5M
GBP/USD also drifted lower on Thursday, but unlike the euro, it couldn't firmly settle below the critical line. Yesterday, there were no important events or reports for the British pound and the dollar. The pound's decline was triggered by the euro's fall, as it often happens since both pairs usually move in the same direction. The UK did not release any important reports. The U.S. published several reports, but their values were neutral, so the market simply ignored them. The U.S. reports were not crucial. Personal income and spending of American consumers, the Personal Consumption Expenditures (PCE) Price Index, and the number of initial jobless claims, all these data did not differ from the forecasts. Thus, the pound started to fall, and that's a good thing, but the uptrend remains intact.
Despite falling on Thursday, the pair's movements were quite chaotic. During the European session, the price significantly fluctuated in all directions, which formed a series of false signals around the level of 1.2693. In the end, when a good sell signal was formed, and the decline began, traders no longer had to act on it. During the U.S. session, the same thing continued. The price constantly changed direction, bouncing several times from the 1.2606-1.2620 range. Traders did not get good profits from the buy signals, as the price did not even move by the intended direction by 25 pips.
COT report:
COT reports on the British pound also align perfectly with what's happening in the market. According to the latest report on GBP/USD, the non-commercial group closed 4,700 long positions and 6,700 short ones. Thus, the net position of non-commercial traders decreased by another 11,400 contracts in a week. The net position indicator has been steadily rising over the past 12 months, but it has been firmly decreasing since August. The British pound is also losing ground. We have been waiting for many months for the sterling to reverse downwards. Perhaps GBP/USD is at the very beginning of a prolonged downtrend or in the middle of a strong correction. At least in the coming months, we do not see significant prospects for the pound to rise. Even if the entire decline is just a correction, it could still last quite a long time.
The British pound has surged by a total of 2,800 pips from its absolute lows reached last year, which is an enormous increase. Without a strong downward correction, a further upward trend would be entirely illogical (if it is even planned). We don't rule out an extension of an uptrend. We simply believe that a substantial correction is needed first, and then we should assess the factors supporting the US dollar and the British 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 52,300 longs and 80,50 shorts. The bears have been holding the upper hand in recent months, and we believe this trend will continue in the near future.
Analysis of GBP/USD 1H
On the 1H chart, GBP/USD continues its short-term uptrend but the Kijun-sen line has moved upwards, and now the price is below it. For the past two or three weeks, we have been expecting a stable downward movement, but the market simply ignores all positive news for the dollar. Therefore, we believe that the pair is currently following the momentum, and we cannot confirm if it has already ended. As long as the price is below the critical line, we can expect the pair to fall further with the target being the Senkou Span B line.
As of December 1, we highlight the following important levels: 1.1927-1.1965, 1.2052, 1.2109, 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2520, 1.2605-1.2620, 1.2693, 1.2786, 1.2863. The Senkou Span B line (1.2509) and Kijun-sen line (1.2661) lines can also be sources of signals. Signals can be "bounces" and "breakouts" of these levels and lines. It is recommended to set the Stop Loss level to break-even when the price moves in the right direction by 20 pips. The Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. The illustration also includes support and resistance levels that can be used to lock in profits from trades.
On Friday, the UK will publish the Manufacturing Purchasing Managers' Index (PMI), and the final value for November is unlikely to differ from the initial estimate. From the U.S., Federal Reserve Chair Jerome Powell will speak, and the ISM Manufacturing Report will be published. Both events are crucial, so we can expect strong movements during the U.S. session.
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.
