On Thursday, the GBP/USD currency pair exhibited unusual and illogical trading behavior. The British pound had relatively little macroeconomic data and fewer fundamental events throughout the day, yet it closely mirrored the movements of the euro, which highlights the strong correlation between the two currencies. However, the euro managed to generate one decent signal and demonstrated average volatility, while the pound sterling did not show any significant movement.
No reports were published in the UK on Thursday, and the Bank of England meeting is scheduled for next week. We still believe that the British currency has sufficient reasons to resume its medium-term downtrend, but currently, a correction is ongoing and may continue for several more weeks. It is important to remember that our expectations are based on the technical analysis of the daily timeframe, where the pound has decreased almost without any correction for three months. A stronger correction would be logical at this point. However, on the hourly timeframe, this correction may manifest as a series of trends. Regardless, even on the hourly timeframe, there are still no indications suggesting a decline in the British currency. Meanwhile, this week, the GBP/USD pair has been trading within a flat range.
From a trading signals perspective, we can observe two rebounds from the 1.2429–1.2445 area. In the first instance, the price struggled to rise even 20 pips, while in the second, the signal emerged so rapidly that it was difficult to react in time. Additionally, a day earlier, two false signals were also generated in this same area. The main concern, however, is not with the area itself but with the nature of the British pound's movement this week.
The Commitment of Traders (COT) reports for the British pound indicate that commercial traders' sentiment has fluctuated consistently over recent years. The red and blue lines in the reports, which represent the net positions of commercial and non-commercial traders, frequently intersect and typically remain close to the zero mark. Currently, these lines are near each other, suggesting that the number of buy and sell positions is roughly equal.
On the weekly timeframe, the price initially broke through the 1.3154 level but then retraced back to the trendline, which it successfully breached. This break of the trendline strongly indicates that the decline of the pound is likely to continue. However, there has also been a rebound from the previous local low on the weekly chart, which could point to a range-bound market.
According to the latest COT report, the non-commercial group has closed 4,800 buy contracts and opened 3,800 sell contracts. This resulted in a decrease of 8,600 contracts in the net position of non-commercial traders, which is not a positive sign for the pound.
The fundamental outlook does not provide any justification for long-term purchases of the British pound, and the currency remains at risk of continuing its global downward trend. Consequently, the net position may continue to decline, signaling a further reduction in demand for the British pound.
On the hourly timeframe, the GBP/USD pair continues to exhibit a local upward trend. Nevertheless, we still do not see any factors that could support the pound sterling's growth in the long term. In the short term, however, the trend is upward, suggesting that long positions should be considered on lower timeframes. Conversely, on higher timeframes and for the long-term outlook, we do not recommend taking long positions. A decline in the pound sterling could begin soon, with the first trendline as the target, but this week, the market movement has predominantly been flat.
For January 31, we highlight the following important levels: 1.2052, 1.2109, 1.2237-1.2255, 1.2349, 1.2429-1.2445, 1.2511, 1.2605-1.2620, 1.2691-1.2701, 1.2796-1.2816. The Senkou Span B line (1.2340) and the Kijun-sen line (1.2407) may also serve as sources of signals. The Stop Loss level is recommended to be set at breakeven if the price moves 20 pips in the right direction. The Ichimoku indicator lines may shift throughout the day, which should be considered when identifying trading signals.
On Friday, there are no significant events scheduled in the UK once again. In the US, the only relatively important data release is the Personal Consumption Expenditures (PCE) Price Index. Some experts regard this index as highly significant, calling it the "Fed's favorite inflation gauge." However, we do not share this perspective. This week, there has been no noticeable reaction to much more important events.
*A análise de mercado aqui postada destina-se a aumentar o seu conhecimento, mas não dar instruções para fazer uma negociação.
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