GBP/USD 5-Minute Analysis
The GBP/USD currency pair attempted a slight correction during Thursday's session but achieved little. Before Jerome Powell's speech, the market had been optimistic, expecting Powell to signal readiness to continue easing at a moderate pace. However, the Fed Chair made it clear that the U.S. central bank is in no hurry to act and, most importantly, has the luxury of waiting. Inflation is steady toward 2%, the economy remains strong, and the labor market is stable. Consequently, the U.S. dollar strengthened again in the evening.
In the medium term, we expect the dollar to continue strengthening, although today, it might attempt another correction. On Friday, the UK will release GDP and industrial production data, which are unlikely to provide significant support for the pound. As a result, further declines in the pound cannot be ruled out. A breakdown below the 1.2691–1.2701 area increases the likelihood of the downtrend continuing. Overall, there are no solid reasons for the pound to rise. While technical corrections are possible, the fundamental backdrop favors the U.S. dollar.
Two trading signals were generated in the 5-minute time frame yesterday. During the European session, a solid sell signal formed around the 1.2691–1.2701 area, after which the price nearly reached the 1.2605–1.2620 zone. Later in the evening, the price returned to the initial area and consolidated above it. However, this buy signal was better avoided, as Powell's speech was expected and could have triggered further declines, which indeed occurred.
COT Report
The latest Commitments of Traders (COT) report for the British pound highlights fluctuating sentiment among commercial traders in recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, frequently intersect and remain near zero. The most recent downtrend coincided with the red line moving below the zero mark. The red line is above zero, and the price has breached the critical level of 1.3154.
The latest COT report shows that the non-commercial group closed 11,900 BUY contracts and opened 9,400 SELL contracts, reducing their net position by 21,300. Despite this, the market remains hesitant to sell the pound in the medium term.
The fundamental backdrop continues not to justify long-term pound purchases. Meanwhile, the currency has a realistic chance of resuming its global downtrend. However, the weekly time frame shows an ascending trendline, so expecting long-term pound depreciation is premature until this line is breached. The pound has been rising against most expectations in the medium term.
GBP/USD 1-Hour Analysis
The GBP/USD pair maintains a generally bearish outlook on the hourly time frame. The upward trend has been canceled, and further declines in the pound are expected to be strong and prolonged. The previous correction turned out to be flat and has already ended. A new correction might begin, but further declines are anticipated as long as the price remains below the 1.2691–1.2701 area.
For November 15, we identify the following key levels: 1.2516, 1.2605–1.2620, 1.2796–1.2816, 1.2863, 1.2981–1.2987, 1.3050, 1.3119, 1.3175. The Senkou Span B (1.2939) and Kijun-sen (1.2776) lines can also serve as signal sources. A Stop Loss should be placed at breakeven once the price moves 20 pips in the intended direction. Note that the Ichimoku indicator lines may shift during the day, so consider this when identifying trading signals.
On Friday, the UK will release industrial production and third-quarter GDP reports. Given the continued weakness in the economy, we believe these are more likely to trigger further declines in the pound. While the figures may exceed forecasts, significant growth in the pound remains unlikely. The U.S. will also release two medium-impact reports, which are unlikely to alter overall market sentiment significantly.
Chart Explanations:
Support and resistance levels: thick red lines around which movement may end. They are not sources of trading signals.
Kijun-sen and Senkou Span B lines: Ichimoku indicator lines transferred from the 4-hour to the 1-hour timeframe. These are strong lines.
Extreme levels: thin red lines where the price previously rebounded. They are sources of trading signals.
Yellow lines: Trend lines, trend channels, and other technical patterns.
Indicator 1 on COT charts: The net position size for each category of traders.
