GBP/USD 5-Minute Analysis
The GBP/USD currency pair also showed strong upward movement on Friday but failed to break through the trendline, the Kijun-sen line, and the 1.3307 level. Thus, the trend for the euro has shifted upward, but not for the pound sterling. Of course, we don't believe the euro will continue to rise while the pound continues to fall. However, the fundamental background currently differs slightly between the euro and the pound.
The key difference lies in the monetary policies of the central banks. The European Central Bank, if it hasn't finished easing yet, is close to completing its easing measures. The Bank of England, on the other hand, is still far from ending its key rate cuts. Thus, the Bank of England is likely to continue cutting rates more aggressively and more frequently than the ECB. That's why the British pound may be growing more slowly at the moment. Already next week, the BoE will hold another meeting, at which it plans to cut the rate for the third time this year. However, we also believe that the U.S. dollar will continue to decline in any case, because now the Federal Reserve may cut rates even faster and deeper than both the ECB and the BoE combined. Therefore, we expect an upward trend in GBP/USD.
In the 5-minute time frame on Friday, three nearly perfect trading signals were generated. During the European trading session, the price rebounded from the 1.3212 level and moved down about 50 pips. It didn't reach the nearest target of 1.3125, but traders could have taken profits before the release of the U.S. data. Afterward, the price bounced off the critical line following a sharp rise, and this signal could also have been traded. The price dropped to the nearest target of 1.3212 and then rebounded from it—the final buy signal formed too late, just a few hours before market close.
COT Report
COT reports for the British pound show that in recent years, the sentiment of commercial traders has been constantly changing. The red and blue lines, which represent the net positions of commercial and non-commercial traders, frequently cross and are mainly near the zero mark. They've nearly converged again, indicating an approximately equal number of long and short positions.
The dollar continues to decline due to Donald Trump's policies, so, in principle, the market makers' demand for the pound sterling is currently not particularly significant. The trade war will continue in some form for quite a while. Demand for the dollar will continue to decline. According to the latest report on the British pound, the "Non-commercial" group closed 5,900 BUY contracts and opened 6,600 SELL contracts. Thus, the net position of non-commercial traders fell by 12,500 contracts over the reporting week.
In 2025, the pound rose significantly, but it's important to understand that there was one main reason: Trump's policies. Once that factor is neutralized, the dollar could begin to rise again, but no one knows when that will happen. It doesn't matter how fast the net position for the pound rises or falls. The dollar is falling regardless—and typically at a faster rate.
GBP/USD 1-Hour Analysis
In the hourly time frame, GBP/USD is not yet ready for a new uptrend. However, as early as Monday, the price may break above the trendline and the Kijun-sen line, and on the daily time frame, it has already rebounded from the important and strong Senkou Span B line. From our perspective, the fundamental backdrop remains unfavorable for the U.S. dollar, so we expect the "2025 trend" to resume in the longer term.
For August 4, we highlight the following important levels: 1.3125, 1.3212, 1.3369–1.3377, 1.3420, 1.3509, 1.3615, 1.3681, 1.3763, 1.3833, 1.3886. The Senkou Span B line (1.3472) and Kijun-sen line (1.3288) may also serve as signal sources. The Stop Loss level is recommended to be moved to breakeven after the price moves 20 pips in the correct direction. Note that the Ichimoku indicator lines may shift during the day, which should be considered when identifying trading signals.
On Monday, the event calendars for the UK and the U.S. are empty, but we believe traders may continue to sell off the dollar based on Friday's data.
Trading Recommendations
We believe that the pair may continue its upward movement on Friday, so a break above the Kijun-sen line will serve as a signal to open long positions with a target of 1.3369–1.3377. Short positions are also possible on a bounce from the critical line, but after Friday, we would avoid selling.
Illustration Explanations:
- Support and resistance price levels – thick red lines where movement may end. They are not trading signal sources.
- Kijun-sen and Senkou Span B lines—These are strong Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour one.
- Extremum levels – thin red lines where the price has previously rebounded. These act as trading signal sources.
- Yellow lines – trend lines, trend channels, and other technical patterns.
- COT Indicator 1 on the charts – the size of the net position for each category of traders.
