GBP/USD 5-Minute Analysis

The GBP/USD currency pair could not show any interesting movement on Monday. In the first half of the day, the price attempted to at least test the trendline, but by the second half, it was already falling. It appears that without strong macroeconomic support, the British pound has little to rely on. We are unsurprised that the pound cannot even manage a minimal correction. Throughout 2024, we have maintained that the pound is overbought and unjustifiably expensive. The market has consistently overlooked the actual state of the British economy and that the Bank of England will also lower its key rate, just like the Federal Reserve. Additionally, we have seen a two-year upward correction within the framework of a global, 16-year downtrend. With these factors in play, expecting sustained growth in the British pound is extremely difficult.

There were no macroeconomic reports on Monday in either the U.K. or the U.S. If, by the end of the week, most reports from the U.S. fall below forecasts, we may see the price consolidate above the trendline and start a correction. However, we must remember that just as the market ignored negative news for the pound for most of the year, it might now ignore negative news for the dollar. This is likely because the impact of the Fed's monetary easing has already been priced in.

On the 5-minute chart, there is no point in highlighting any trading signals. The pair moved slowly toward the 1.2981-1.2987 area, but when it reached it, the momentum faded. Volatility was again low, and buying the pound when it couldn't even consolidate above the trendline, which has been close to the price for weeks, is simply illogical. However, consolidating below the critical line could spark a new wave of decline for the pound. This week, a lot will depend on U.S. macroeconomic data.

COT Report Analysis

The COT (Commitment of Traders) reports on the British pound show that commercial traders' sentiment has constantly shifted over recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, frequently cross and are mostly close to the zero mark. We also observe that the latest downtrend cycle coincided with a period when the red line was below the zero mark. Currently, the red line is above zero, and the price has broken an important level at 1.3154.

According to the latest COT report on the British pound, the non-commercial group closed 11,300 BUY contracts and only 100 SELL contracts. Consequently, the net position of non-commercial traders decreased by 11,300 contracts. In the medium term, the market still shows little interest in selling the pound sterling.

The fundamental backdrop still provides no basis for long-term purchases of the pound sterling, and the currency has a real chance of resuming a global downtrend. However, on the weekly time frame, an ascending trendline is in place, so until this is broken, it is premature to expect a long-term decline in the pound. The pound sterling has continued to rise despite nearly every adverse condition (again, in the medium term), and even when COT reports indicate that major players are selling the pound, it still manages to climb.

GBP/USD 1-Hour Analysis

In the hourly time frame, the GBP/USD pair continues its decline. The uptrend has been negated, so further declines in the British currency, possibly significant and prolonged, should be expected. Currently, traders must stay below the 1.2981-1.2987 area and the trendline for the pound to keep falling. There are no reasons to expect a correction now, as the price can't reach the trendline.

For October 29, the following key levels are highlighted: 1.2796-1.2816, 1.2863, 1.2981-1.2987, 1.3050, 1.3119, 1.3175, 1.3222, 1.3273, 1.3367, and 1.3439. The Senkou Span B (1.3020) and Kijun-sen (1.2952) lines may also be signal sources. A Stop Loss level is recommended to be set to break even once the price has moved 20 pips in the intended direction. Note that the Ichimoku indicator lines may shift throughout the day, which should be considered when determining trading signals.

On Tuesday, no significant events are scheduled in the U.K., while only one report will be released in the U.S. – the JOLTs job openings data. This rather interesting and important report could prompt a market reaction. The dollar may again show a tendency to rise.

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.