GBP/USD Analysis 5M

The GBP/USD currency pair also aimed to continue its upward movement on Friday, but about eight hours before the close of the day and week, it sharply declined. Of course, such a drop in the British pound could not have been triggered by the relatively important ISM Manufacturing Index from the US. The ISM Index was slightly below forecast, which might have led to a drop in the dollar, but not to its growth. Therefore, we can confidently conclude that the market did not react to macroeconomic data. This leaves only one option—geopolitics. On Friday, it was revealed that Iran sent yet another plan for resolving the crisis to Washington, but Donald Trump rejected it. This is not surprising, as Iran still refuses to abandon its nuclear weapons, while Trump continues to demand exactly that from Iran. Thus, the parties could send each other another 50 proposals, but unless the key issue is resolved, no peace agreement will be signed, and the Strait of Hormuz will remain blocked.

From a technical perspective, the hourly timeframe still shows an upward trend, but the price has been contained within a sideways channel for two weeks. On Friday, it broke out of that channel, which could stimulate the development of the upward trend. For two weeks in the flat market, the market found no reasons to return to buying the US dollar, and geopolitics is no longer providing significant support for the dollar as it once did.

On the 5-minute timeframe, there were three trading signals formed on Friday, all during the US trading session. Initially, the pair bounced off the 1.3588 level twice during the European trading session, allowing traders to open long positions. However, the price failed to reach the nearest target area, so the trade's profit could only be realized through manual closure. By the end of the day and the week, the pair consolidated below 1.3588, but it was obviously too late to act on this signal.

COT Report

The COT reports for the British pound show that, in recent years, commercial traders' sentiment has been constantly changing. The red and blue lines, which represent the net positions of commercial and non-commercial traders, frequently intersect and are mostly near the zero mark. Currently, the lines are diverging, with non-commercial traders still dominating with... sales. Given the events in the Middle East, it is no surprise that demand for riskier currencies is falling, while demand for the dollar is rising.

In the long term, the dollar continues to decline due to Trump's policies, which are clearly visible on the weekly timeframe. The trade war will continue, in one form or another, for a long time, and Trump's policies are aimed directly and indirectly at weakening the American currency. However, geopolitical factors are currently at the forefront, having recently provided strong support for the dollar. As the conflict in the Middle East remains unresolved, the US dollar may still show growth prospects. According to the latest COT report (dated April 28), the "Non-commercial" group closed 3,500 BUY contracts and opened 5,000 SELL contracts. Thus, the net position of non-commercial traders fell by 8,500 contracts over the week.

GBP/USD Analysis 1H

On the hourly timeframe, the GBP/USD pair continues to form an upward trend, which could be reversed if the British pound consolidates below the 1.3465-1.3480 area. The influence of geopolitics appears to be weakening, judging by movements in recent weeks, although military actions in the region are currently on pause. The Strait of Hormuz remains blocked, with no progress in negotiations, but some information suggests that discussions are ongoing at a distance—without any significant progress. This situation allows the British pound to maintain its bullish sentiment.

For May 4, we highlight the following important trading 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 (1.3521) and the Kijun-sen line (1.3553) may also serve as sources of signals. It is recommended to set a stop loss to breakeven when the price moves in the correct direction by 20 pips. The lines of the Ichimoku indicator may shift throughout the day, which should be taken into account when determining trading signals.

On Monday, there are no significant events planned in the UK and the US. Therefore, traders will only be able to react to geopolitical news if any arises. Without them, volatility is expected to be low.

Trading Recommendations:

Today, traders may consider short positions if the price consolidates below the Kijun-sen line, targeting the 1.3465-1.3480 area. Long positions can be opened with a target of 1.3671-1.3681 if the price consolidates above 1.3588.

Explanation of Illustrations:

• Support and resistance price levels (resistance/support) – thick red lines around which movement may end. They are not sources of trading signals.
• Kijun-sen and Senkou Span B lines – lines of the Ichimoku indicator transferred to the hourly timeframe from the four-hour. They are strong lines.
• Extremity levels – thin red lines from which the price had previously rebounded. 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.