Analysis of GBP/USD 5M

The GBP/USD pair continued its downward movement on Friday, with no specific event driving it. Instead, on Friday, traders could have expected further gains in the euro and the pound, given the macroeconomic calendar. Almost all reports from the Eurozone and Germany turned out better than forecasts—slightly better, but better nonetheless. It was clear that they did not anticipate a decline in the European currency. In the worst-case scenario for European currencies, they would have maintained the status quo against the dollar. During the American session, the Producer Price Index was released in the US, unexpectedly registering at a complete 0.5% for December. Theoretically, this index could have triggered a rise in the dollar, as a higher PPI could lead to a larger increase in CPI (inflation). And the higher inflation, the lower the likelihood that the Fed will resume monetary policy easing.

However, we want to remind you that the PPI index is not extremely important, and the market typically makes conclusions based on overall inflation rather than its individual components. In any case, a multitude of shocks may await the Fed this year. Donald Trump will not cease attempts to exert control over the Federal Reserve. If he succeeds, interest rates could be cut by at least half, regardless of inflation. The market cannot ignore this.

On the 5-minute timeframe, it is evident that the pair traded sideways for the most part throughout Friday. During this time, several false trading signals formed in the 1.3751-1.3763 range. Movement began only with the opening of the American session. Another sell signal formed in the specified area, and a few hours later, the nearest target area, 1.3671-1.3681, was reached.

COT Report

COT reports for the British pound show that the sentiment among commercial traders has been changing constantly in recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, frequently intersect and are mostly near the zero mark. Currently, the lines are converging, with non-commercial traders still dominating... sales. Recently, speculators have increased their long positions, so a change in sentiment may occur soon, though it is unlikely to affect the GBP/USD pair.

The dollar continues to decline due to Donald Trump's policies, as seen clearly on the weekly timeframe (illustration above). The trade war will continue in one form or another for a long time, and the Fed will lower rates over the next 12 months in any case. Demand for the dollar will decrease one way or another. According to the latest COT report (dated January 27) for the British pound, the "Non-commercial" group opened 6,500 BUY contracts and 600 SELL contracts. As a result, the net position of non-commercial traders increased by 5,900 contracts over the week.

In 2025, the pound increased significantly, but it should be understood that there is only one reason for this: Trump's policies. Once this reason is neutralized, the dollar may start to rise. However, when this will happen is unknown to anyone.

Analysis of GBP/USD 1H

On the hourly timeframe, the GBP/USD pair continues to form an upward trend. The British pound reached last year's highs without much difficulty and is now ready to aim much higher. However, it has decided to correct first. The fundamental and macroeconomic background fully supports such a development, as the market has corrected and built strength for a new upward surge over the past six months.

For February 2, we highlight the following significant levels: 1.3201-1.3212, 1.3307, 1.3369-1.3377, 1.3437, 1.3533-1.3548, 1.3615, 1.3671-1.3681, 1.3751-1.3763, 1.3846-1.3886, 1.3948. The Senkou Span B line (1.3605) and Kijun-sen line (1.3760) could also serve as sources of signals. It is recommended to set the stop-loss order to breakeven when the price moves in the right direction by 20 points. The Ichimoku indicator lines may shift during the day, which should be taken into consideration when determining trading signals.

On Monday, indexes of business activity in the manufacturing sectors are scheduled for publication in the Eurozone, Germany, and the US. The European indexes hold no value, as they will be released in second estimates. In the US, the ISM index warrants primary attention from traders.

Trading Recommendations:

Today, traders may consider short positions with targets at 1.3605-1.3615 if the price consolidates below the 1.3671-1.3681 area. Long positions will become relevant with targets at 1.3751-1.3763 if the price bounces from 1.3671-1.3681.

Explanations for Illustrations:

• Support and Resistance Levels – thick red lines, where movement may come to a halt. These are not sources of trading signals.
• Kijun-sen and Senkou Span B Lines – lines from the Ichimoku indicator, transferred to the hourly timeframe from the 4-hour timeframe. They are strong lines.
• Extremum Levels – thin red lines, from which the price has 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.