Analysis of GBP/USD 5M
The GBP/USD currency pair moved similarly to the EUR/USD pair throughout Friday. The reasons were absolutely the same. It should be remembered that the entire currency market has been "dancing" from the US dollar for two months. It is unlikely that the situation will change in the new week. On Saturday, it became known that the Strait of Hormuz was once again closed, and on Sunday, there was no information on the results of negotiations between Iran and the US. However, Donald Trump was overflowing with new threats directed at Tehran. Unofficial sources indicated that Iran still has no intention of abandoning its nuclear potential. Thus, what exactly the parties are negotiating about remains a mystery. The negotiations are becoming increasingly formal, with talks taking place, but both sides understand that no agreement can be reached.
On the hourly timeframe, the upward trend persists, but we will likely see a correction in the new week. There are several reasons for this. First, the geopolitical backdrop worsened over the weekend. Secondly, the market began selling EUR/USD and GBP/USD on Friday, with no particular reason. Thirdly, a "bearish" divergence was formed on the CCI indicator on the 4-hour timeframe. Fourthly, the British currency failed to break the level of 1.3588 three times. Thus, we are expecting a decline to at least the lower boundary of the Ichimoku cloud – the Senkou Span B line.
On the 5-minute timeframe on Friday, three trading signals were formed. The first signal – a bounce from the area of 1.3533-1.3548 – turned out to be false. The second signal allowed traders to open long positions, but the price did not reach the target area. The third signal in the same area formed just before the market closed for the weekend, so it should not have been acted upon. Overall, it was not the most successful day, but only because of the pair's final decline.
COT Report
COT reports for the British pound show that commercial traders' sentiment has been changing steadily in recent years. The red and blue lines, which reflect the net positions of commercial and non-commercial traders, frequently intersect and are mostly close to the zero mark. Currently, the lines are moving apart, with non-commercial traders still dominating... sales. However, given the events in the Middle East, it is no longer 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 (see the illustration above). The trade war will continue in one form or another for a long time to come, and Trump's policies are aimed both directly and indirectly at weakening the US currency. However, geopolitical factors are currently paramount, providing strong support for the dollar. According to the latest COT report (from April 14), the "Non-commercial" group opened 7,600 BUY contracts and 5,900 SELL contracts. Thus, the net position of non-commercial traders increased by 1,700 contracts over the week.
Analysis of GBP/USD 1H
On the hourly timeframe, the GBP/USD pair continues to form an upward trend, which could be canceled if a full-scale war resumes in the Middle East. It should also be noted that the influence of geopolitics is weakening, judging by the movements this week, although military actions in the region are currently on pause. The Strait of Hormuz remains blocked, and there is no progress in the negotiations. A correction is looming.
For April 20, we highlight the following important levels: 1.3096-1.3115, 1.3179-1.3187, 1.3369-1.3377, 1.3465-1.3480, 1.3588, 1.3671-1.3681, 1.3751-1.3763. The Senkou Span B line (1.3382) and Kijun-sen line (1.3516) could also be sources of signals. It is recommended to set a Stop Loss to break even when the price moves in the right direction by 20 pips. The Ichimoku indicator lines may move during the day, which should be considered when determining trading signals.
On Monday, there are no major events or reports scheduled in the UK or the US, so all market attention will be focused on negotiations between Iran and the US and on Trump's rhetoric. Traders may only react to geopolitical developments today.
Trading Recommendations:
Today, traders may consider short positions targeting 1.3369-1.3377 if the price settles below the 1.3465-1.3480 area. Long positions can be opened with targets of 1.3588 and 1.3671-1.3681 if the price bounces from the 1.3465-1.3480 area or the critical line.
Explanations of Illustrations:
Price levels of support and resistance – thick red lines, around which the movement may end. They are not sources of trading signals.
Kijun-sen and Senkou Span B lines – lines of the Ichimoku indicator that are carried over to the hourly timeframe from the 4-hour one. They are strong lines.
Extreme 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 of each category of traders.
