GBP/USD 5-Minute Analysis
The GBP/USD currency pair also continued to rise on Wednesday. However, the pound's growth this week has been weaker than the euro's, which is strange. Then again, there is little logic in the movements of either major currency pair right now. Donald Trump's decisions and statements push the U.S. dollar into freefall, which is why the euro and the pound are strengthening. Trump's actions may be a deliberate attempt to weaken the dollar. During his first term, he was eager to devalue the U.S. currency and repeatedly urged Jerome Powell to cut interest rates—without success. Now, realizing that pressuring the Fed chair again would be futile, Trump may be pursuing a different strategy. However, this theory sounds almost like science fiction. Regardless, the dollar is falling, and no one knows how much further it will drop. No one can predict what Trump will say tomorrow or the day after.
Macroeconomic data was irrelevant on Wednesday. The most important report—the ISM Services PMI—came in above forecasts, yet the market didn't react. Neither technical analysis nor fundamentals nor macroeconomics are working right now.
Several trading signals were generated on Thursday. The price formed three buy signals near the 1.2796-1.2816 range, ultimately reaching the 1.2863 target. It broke through this level so the upward movement could continue on Thursday. Whether or not to trade in these conditions is a personal decision for each trader, but we believe the current movements are illogical and difficult to predict.
COT Report
COT reports for the British pound indicate that commercial traders' sentiment has been fluctuating significantly in recent years. The red and blue lines, which represent the net positions of commercial and non-commercial traders, often intersect and generally hover near the zero mark. Currently, they are close to each other, suggesting a roughly equal number of long and short positions.
On the weekly timeframe, the price initially broke through the 1.3154 level and subsequently declined to the trend line, which was also breached. This break of the trend line implies that the pound's decline is likely to continue. However, there was a rebound from the previous local low on the weekly chart, which may indicate a range-bound movement.
The latest COT report on the British pound shows that the non-commercial group opened 500 BUY contracts and closed 4,500 SELL contracts. As a result, the net position of non-commercial traders increased by 5,000 contracts over the week, though this change does not significantly bolster the pound.
The fundamental backdrop still does not justify long-term purchases of the pound, and the currency remains at risk of continuing its long-term downtrend. Therefore, the net position may decline, signaling reduced demand for the British pound.
GBP/USD 1-Hour Analysis
On the hourly chart, GBP/USD completed its previous uptrend, which had formed over the past few weeks, and immediately started a new one. This may not be the last trend shift within the broader upward correction on the daily timeframe. However, we still don't see long-term factors supporting sterling's rise. The only thing propping up the British pound right now is Donald Trump, who appears to be attempting to decrease the value of the dollar in his own distinct way. The market is ignoring all other factors.
For March 6, the key levels to watch are 1.2237-1.2255, 1.2331-1.2349, 1.2429-1.2445, 1.2511, 1.2605-1.2620, 1.2691-1.2701, 1.2796-1.2816, and 1.2981-1.2987. The Senkou Span B (1.2637) and Kijun-sen (1.2718) lines could also serve as signal sources. A Stop Loss should be placed at breakeven if the price moves 20 points in the right direction. The Ichimoku indicator lines may shift throughout the day, which should be factored in when identifying signals.
No significant economic reports are scheduled in the UK or the U.S. for Thursday, but they aren't needed. The pound could continue rising as long as Trump keeps making statements like those we heard on Monday, Tuesday, and Wednesday.
Illustration Explanations:
- Support and Resistance Levels (thick red lines): Thick red lines indicate where movement may come to an end. Please note that these lines are not sources of trading signals.
- Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the 4-hour timeframe to the hourly timeframe. These are strong lines.
- Extreme Levels (thin red lines): Thin red lines where the price has previously bounced. These serve as sources of trading signals.
- Yellow Lines: Trendlines, trend channels, or any other technical patterns.
- Indicator 1 on COT Charts: Represents the net position size for each category of traders.
