GBP/USD 5-Minute Analysis
The GBP/USD currency pair soared upward on Monday, although there were no particular reasons for such a move. The UK PMI indices did not suggest growth for the pound, and the US PMI indices certainly did not either. Thus, the pound sterling again showed growth where it should not have. However, the technical picture currently does not look distorted. The price corrected towards the Senkou Span B and Kijun-sen lines, and it may bounce off these levels and attempt to break through the 1.2605-1.2620 area again. Sometimes, a slight buildup is needed to breach such strong zones.
As mentioned, the pound sterling could grow this week since no one knows how the Bank of England and Federal Reserve meetings will conclude. Of course, we cannot expect growth for the pound based on the current fundamental background, but this does not mean it is impossible in principle. Unfortunately, Monday demonstrated that illogical movements remain integral to the pound's behavior. Nevertheless, we cannot forecast its growth or advise traders to buy the pound.
On Monday's 5-minute timeframe, there was only one buy signal, which began forming back on Friday when the price failed to break through the 1.2605-1.2620 area. By the end of the day, the price reached the 1.2691-1.2701 area, also near the Ichimoku indicator lines. Thus, the pound faces a super-strong resistance area from above. If the pound stops exhibiting illogical growth, we would say there is a 90% probability of a bounce and a return to the 1.2605-1.2620 area.
COT Report
COT reports for the British pound show that the sentiment among commercial traders has been constantly shifting in recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, frequently intersect and, in most cases, hover near the zero mark. Recently, the price broke above the 1.3154 level and then fell to the trendline. We expect the price to consolidate below the trendline, confirming a shift to a downward trend.
According to the latest report on the British pound, the "non-commercial" group opened 4,700 BUY contracts and closed 300 SELL contracts. As a result, the net position of non-commercial traders increased by 7,700 contracts over the week. However, our overall expectations remain the same.
The fundamental background still does not justify long-term purchases of the British pound. The currency has significant potential to resume a global downtrend. While the trendline has prevented further declines, should the price fail to break below it, we might see another upward movement, potentially pushing the pound above the 1.3500 level. But what fundamental factors currently support such growth? The pound cannot rise indefinitely without a solid basis.
GBP/USD 1-Hour Analysis
The GBP/USD pair maintains a bearish bias on the hourly timeframe, and the correction may be complete. We still do not see any reasons for the pound to show growth, except for a technical need to correct periodically. The price has already corrected in this case, so we expect a new decline in the coming weeks. The Bank of England and Federal Reserve meetings could negatively impact the dollar, but the probability of this happening is low.
For December 17, we highlight the following key levels: 1.2429-1.2445, 1.2516, 1.2605-1.2620, 1.2691-1.2701, 1.2796-1.2816, 1.2863, 1.2981-1.2987, 1.3050. The Senkou Span B (1.2713) and Kijun-sen (1.2697) lines can also be sources of signals. The Stop Loss order is recommended to be set at breakeven if the price moves 20 pips in the correct direction. The Ichimoku indicator lines may shift throughout the day, so this must be considered when determining trading signals.
On Tuesday, the UK will release reports on unemployment, jobless claims, and wages, while the US will publish data on industrial production and retail sales. While these five reports are not crucial, they are still significant enough to trigger strong movements if there are deviations from forecasts. Therefore, macroeconomics will play an essential role for the pair today.
Illustration Explanations:
- Support and Resistance Levels (thick red lines): Key areas where price movement might stall. Not sources of trading signals.
- Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the H4 timeframe to the hourly chart, serving as strong levels.
- Extreme Levels (thin red lines): Points where the price has previously rebounded. They can serve as trading signal sources.
- Yellow Lines: Trendlines, channels, or other technical patterns.
- Indicator 1 on COT Charts: Reflects the net position size of each trader category.
