Analysis Of GBP/USD 5M
The GBP/USD currency pair also continued its upward movement throughout Wednesday, which began on Tuesday immediately after the Iranian president's speech on a possible truce with the US. Despite Masoud Pezeshkian not mentioning any potential concessions to Donald Trump or an agreement to his 15-point list of demands, the market gained optimism and immediately began preparing for a ceasefire and the unblocking of the Strait of Hormuz. Traders are ignoring the belligerent rhetoric from the White House alongside conciliatory statements. They also overlook the buildup of American military forces in the region. Their only interest now is the truce, and they believe in it. This explains the two-day rise in the British currency. As soon as the prospect of a truce emerged, demand for risk assets rose, while demand for the dollar fell.
From a technical standpoint, the upward trend has been canceled, and a downward trend is forming. However, all traders fully understand that a couple more news items similar to those seen on Tuesday could see the British pound, along with the euro, continue to move north regardless of the technical picture. Yesterday, the market paid no attention to three fairly strong US reports. Therefore, neither technical analysis, macroeconomics, nor fundamentals is currently influencing the movement of the currency pair.
On the 5-minute timeframe, two duplicate buy signals were formed on Wednesday, which traders could easily capitalize on. During the European trading session, the price first broke through a critical line and then bounced off it from above. By the end of the day, the Senkou Span B line was reached, where profit could be secured.
COT Report
COT reports on the British pound show that, in recent years, sentiment among commercial traders has been shifting constantly. The red and blue lines representing the net positions of commercial and non-commercial traders frequently cross each other and are mostly close to the zero mark. Currently, the lines are moving apart, and non-commercial traders with... short positions remain dominant. However, given the events in the Middle East, it is not surprising that demand for risk currencies is falling, while demand for the dollar is rising.
In the long term, the dollar continues to decline due to Trump's policies, as shown on the weekly timeframe (illustration above). The trade war will continue in one form or another for a long time, and the Federal Reserve is certainly closer to resuming monetary policy than the ECB or the Bank of England, given Trump's persistent pressure and the leadership change in May. However, currently, geopolitical factors are at the forefront, providing strong support for the US currency. According to the latest COT report (dated March 24), the "Non-commercial" group opened 2,200 BUY contracts and closed 4,900 SELL contracts. As a result, the net position of non-commercial traders increased by 7,100 contracts over the week.
Analysis Of GBP/USD 1H
On the hourly timeframe, the GBP/USD pair has begun forming a new downward trend, which could also be canceled in the near future. The market continues to closely monitor events in the Middle East, which account for 90% of market movements. Despite the significant drop of the pair in February-March, we still consider it a correction in the long term (weekly timeframe). The daily timeframe confidently signals the maintenance of an upward trend. Geopolitics continues to dominate the currency market.
For April 2, we highlight the following important levels: 1.3096-1.3115, 1.3201-1.3212, 1.3369-1.3377, 1.3465-1.3480, 1.3533-1.3548, 1.3615, 1.3671-1.3681, 1.3751-1.3763. The Senkou Span B line (1.3347) and Kijun-sen line (1.3267) may also serve as sources of signals. It is advisable to set a Stop Loss at breakeven if the price moves in the right direction by 20 pips. The Ichimoku indicator lines may move throughout the day, which should be taken into account when determining trading signals.
On Thursday, there are no important events scheduled in the UK, and the US will only publish a report on unemployment claims. Nevertheless, if no further news of escalation is received today, the British pound may continue its epic rise after two months of depression.
Trading Recommendations:
Today, traders may open short positions if the price bounces off the Senkou Span B line with targets of 1.3267 and 1.3201-1.3212. Long positions can be opened again with a target of 1.3465-1.3480 if the price holds above the 1.3369-1.3377 area and the Senkou Span B line.
Explanations for Illustrations:
Support and resistance price levels – thick red lines around which movement may end. They are not sources of trading signals.
Kijun-sen and Senkou Span B lines – lines of the Ichimoku indicator transferred from the 4-hour timeframe to the hourly timeframe. They are strong lines.
Extreme levels – thin red lines from which the price previously bounced. They are sources of trading signals.
Yellow lines – trend lines, trend channels, and any other technical patterns.
Indicator 1 on COT charts – the size of the net position for each category of traders.
