GBP/USD 5-Minute Analysis

The GBP/USD currency pair has continued to trade erratically, exhibiting sideways movement for the third or even fourth consecutive day. On the hourly timeframe, it's evident that the price action resembles "zigzag" and "fence-like" patterns. As a result, attempting to trade in such conditions is likely to lead to losses. Last week, the British currency had very little significant news to rely on. While several key reports were released in the Eurozone, there was a lack of important news from the UK. Although the European Central Bank held a meeting, the Bank of England did not. Consequently, the pound was unable to establish a clear direction in the absence of news.

However, this week could bring changes. First, the BoE will hold its meeting, and second, as the start of the month approaches, the U.S. will release its labor market and unemployment data. Therefore, over the next five days, the pound has a significant opportunity to recover. At the very least, it may retrace to the trendline and the Senkou Span B line. It's possible that the global correction on the daily timeframe isn't finished yet; however, before any further upward movement—likely due to technical correction rather than real fundamentals—the pair may need to pull back downward.

For the third consecutive day, we are not considering trading signals on the 5-minute timeframe for the pound. The pair is fluctuating in all directions without a discernible pattern. Market participants seem to be disregarding levels and lines. We believe this is not the optimal time to trade the British currency. Essentially, we are witnessing a correction within a correction, and corrective movements are generally less favorable than trending ones.

COT Report

COT reports on the British pound indicate that the sentiment among commercial traders has been consistently shifting in recent years. The red and blue lines, which represent the net positions of commercial and non-commercial traders, often intersect and remain close to the zero mark. Currently, these lines are near each other, suggesting an approximately equal number of long and short positions.

On the weekly timeframe, the price initially broke through the 1.3154 level before dropping to the trendline, which it subsequently breached. This break suggests that the decline of the pound is likely to continue. However, it's important to note the rebound from the penultimate local low seen on the weekly timeframe, indicating that we might be experiencing a flat market.

The most recent report on the British pound shows that the non-commercial group closed 16,400 buy contracts and 2,900 sell contracts. As a result, the net position of non-commercial traders decreased by another 13,500 contracts over the week, which does not bode well for the pound.

The fundamental backdrop continues to lack support for long-term purchases of the British pound, with the currency facing a real possibility of continuing its global downtrend. Hence, the net position may continue to decline, indicating a further decrease in demand for the pound.

GBP/USD 1-Hour Analysis

On the hourly timeframe, the GBP/USD pair is currently trading in a local uptrend. However, from a long-term perspective, we do not see any strong reasons for the pound to appreciate. Despite this, the short-term trend remains upward, allowing for long positions to be considered on lower timeframes. In contrast, on higher timeframes and for long-term strategies, we do not recommend taking long positions. It is possible that the pound's decline may resume soon, targeting the initial trendline, but the current price action resembles a flat market.

For February 3, we emphasize 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, and 1.2796-1.2816. The Senkou Span B (at 1.2340) and Kijun-sen (at 1.2456) lines may also serve as significant indicators. It is advisable to set a Stop Loss at breakeven if the price moves 20 pips in the desired direction. Keep in mind that the Ichimoku indicator lines can shift throughout the day, which should be taken into account when determining trading signals.

On Monday, reports on the manufacturing sector PMI are scheduled for release in both the UK and the US. These are important data releases for both the pound and the dollar. However, we want to reiterate that the nature of the GBP/USD pair's movements is lacking clarity, making it extremely challenging to generate profits in such conditions.

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.