Analysis of GBP/USD 5M

GBP/USD also started a correction on Monday, although it had much less reason to do so compared to the EUR/USD pair. Take note that the euro is in a downtrend, which is not the case for the British pound. Nevertheless, having just overcome the important area of 1.2691-1.2701, the pound is trying to climb above it. This area had prevented the pound from falling for several weeks. The British currency breached this area last week, but as we can see, at the beginning of the new week, another technical sell signal means absolutely nothing. It is possible that the price is simply correcting a bit higher (towards the Ichimoku indicator lines) before starting a new downward move. However, we would refrain from making such bold predictions before the release of the UK inflation report and the Bank of England meeting. The market might use any formal reason to buy the British currency again.

There were no significant macroeconomic events in either the UK or the US. Volatility was very low throughout the day, but the pound continued to rise throughout the U.S. session. In fact, American investors are buying the pound and selling the dollar. In any case, the pound is rising again. We hope this is just temporary, but so far, it looks like we will miss the start of a new downtrend.

No trading signals were generated on Monday. By the evening, the pair settled above the 1.2691-1.2701 area, but this signal, to put it mildly, is not very strong and was formed too late. The pair may continue to rise, so you can execute this movement. Especially considering how the market has shown in recent months that it prefers to buy the pound.

COT report:

COT reports on the British pound show that the sentiment of commercial traders has frequently changed in recent years. The red and blue lines, which represent the net positions of commercial and non-commercial traders, constantly intersect and generally remain close to the zero mark. According to the latest report on the British pound, the non-commercial group opened 8,100 buy contracts and closed 700 short ones. As a result, the net position of non-commercial traders increased by 8,800 contracts over the week, which is quite significant for the pound. Thus, sellers failed to seize the initiative at the most critical moment.

The fundamental background still does not provide a basis for long-term purchases of the pound sterling, and the currency has a good chance to resume the global downward trend. However, the price has already breached the trend line on the 24-hour timeframe at least twice. The level of 1.2765 is currently preventing the pound from rising further.

The non-commercial group currently has a total of 110,300 buy contracts and 58,200 sell contracts. The bulls have taken the initiative, but aside from the COT reports, there is nothing else that suggests a potential rise in the GBP/USD pair.

Analysis of GBP/USD 1H

On the 1H chart, GBP/USD tried to start a new downward movement, but so far it appears that this is bound to end immediately, just like the previous time. The price may consolidate above the 1.2691-1.2701 area, which will mean that the pair will continue to rise towards the Senkou Span B line. We can expect a bearish reversal near this line, but it is impossible to predict the pair's movements on Wednesday and Thursday. They can be absolutely anything, the pair may even move upwards.

As of June 18, we highlight the following important levels: 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2516, 1.2605-1.2620, 1.2691-1.2701, 1.2796, 1.2863, 1.2981-1.2987. The Senkou Span B line (1.2747) and the Kijun-sen line (1.2757) lines can also serve as sources of signals. Don't forget to set a Stop Loss to breakeven if the price has moved in the intended direction by 20 pips. The Ichimoku indicator lines may move during the day, so this should be taken into account when determining trading signals.

There are no major UK events scheduled for Tuesday, and that's okay. In the next two days, the market will receive crucial information. Today, the U.S. will release reports on retail sales and industrial production. These are secondary of importance. The market may react to these reports, but if traders are determined to buy the pound non-stop, they will not save the dollar from falling once again.

Description of the chart:

Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;

The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;

Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;

Yellow lines are trend lines, trend channels, and any other technical patterns;

Indicator 1 on the COT charts is the net position size for each category of traders;