GBP/USD 5-Minute Analysis

The GBP/USD currency pair had even less justification for growth on Friday than the euro. While the EUR/USD pair only had U.S. data to rely on, the GBP/USD pair also had British data. However, this was not "good" for the pound but rather negative, as the only retail sales report was weaker than expected. Despite this, it had no impact on the pound sterling. It began to rise in the morning, adding about 120 pips throughout the day—120 pips of growth without any solid foundation. The only saving factor is that the euro faced a strong support zone, started to rise on technical grounds, and theoretically could have pulled the pound up alongside it. Like the euro, the pound sterling reached the Kijun-sen line but failed to break through. Therefore, the new week could bring further declines for the British currency. The overall trend remains bearish across all timeframes.

There were several trading signals on Friday, most forming around the 1.2516 level. The price initially made two false rebounds from this level before breaking through on the third attempt. However, not everyone would have been comfortable opening a buy trade after two false signals. The situation was slightly mitigated because the first two sell signals mirrored each other, meaning only one short position should have been opened. If the buy signal were acted upon, it would have undoubtedly brought profit. Short positions could also have been opened on a rebound from the 1.2605–1.2620 area, a critical and strong zone for the pound. However, opening trades before the weekend might not have been an option for everyone. Nonetheless, the signal was formed, meaning a new decline could be expected today, especially since Friday's illogical growth.

COT Report

COT reports for the British pound reveal that the sentiment among commercial traders has been consistently shifting over recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, frequently intersect and mostly hover near the zero mark. Currently, the price first broke through the 1.3154 level and then fell back to the trendline. A price consolidation below the trendline is likely. The first rebound from it (technically, the fourth attempt) was very weak. The chart suggests that the next attempt could be successful, potentially leading to a sharp drop.

According to the latest COT report on the British pound, the Non-commercial group closed 14,500 BUY contracts and 9,000 SELL contracts, reducing the net position by another 5,500 contracts over the week.

The fundamental backdrop still does not justify long-term purchases of the pound sterling. On the contrary, the currency has a real chance of resuming its downward trend globally. For now, the trendline is preventing the pound from further declines. However, if the trendline doesn't allow the price to break lower, another upward move above 1.3500 could occur. But what fundamental reasons currently support such a scenario? After all, the pound cannot continue rising indefinitely without solid grounds.

GBP/USD 1-Hour Analysis

The GBP/USD pair generally maintains a bearish tone on the hourly timeframe, and the three-week correction appears to be over. We still don't see what could drive the pound sterling higher, apart from the technical necessity to correct periodically. While the Bank of England and Federal Reserve meetings could have negatively impacted the dollar, they only hurt the pound. In the medium term, we still expect further declines in the British currency.

For December 23, the following key levels are highlighted: 1.2429–1.2445, 1.2516, 1.2605–1.2620, 1.2691–1.2701, 1.2796–1.2816, 1.2863, 1.2981–1.2987, 1.3050. The Senkou Span B (1.2708) and Kijun-sen (1.2602) lines can also serve as signal sources. Stop-loss orders should be placed at breakeven once the price moves 20 pips in the desired direction. It's important to note that Ichimoku indicator lines may shift during the day, so this must be considered when identifying trading signals.

The UK will release the third-quarter GDP report (third estimate) on Monday. The economy is expected to grow by a "whopping" 0.1%, unlikely to encourage pound buyers. A decline is far more probable today.

Illustration Explanations:

Support and Resistance Levels (thick red lines): Key areas where price movement might stall. Not sources of trading signals.

Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the H4 timeframe to the hourly chart, serving as strong levels.

Extreme Levels (thin red lines): Points where the price has previously rebounded. They can serve as trading signal sources.

Yellow Lines: Trendlines, channels, or other technical patterns.

Indicator 1 on COT Charts: Reflects the net position size of each trader category.