GBP/USD 5-Minute Analysis
The GBP/USD currency pair also resumed its upward movement on Wednesday. The rise of the British pound, which in reality still reflects the fall of the US dollar, began overnight, long before the release of the UK inflation report, which could have sparked a strong rally in the pound. Inflation in Britain not only increased but surged significantly, exceeding forecasts. Thus, it is possible that the Bank of England acted prematurely when it cut interest rates in May. Whether it did or not no longer matters. What matters is that the next round of monetary easing from the BoE may not happen this year.
Meanwhile, the pound sterling broke out above its sideways range, consolidating above the 1.3439 level. And it didn't need new tariffs, sanctions, or Trump-led conflicts to do so. While the US dollar used to collapse daily due to trade pressure headlines from the American president, now that's no longer necessary. The market continues to systematically sell off the US dollar despite the recovery in the US stock market, the Federal Reserve's hawkish stance, and the BoE's rate cut.
In the 5-minute timeframe, several trading signals were formed around the 1.3439 level. First, the pair broke through this level on the strong UK inflation data news. Then it dipped below it, bounced off from underneath, and returned to it at the end of the day. Thus, three signals were false, while the fourth had not yet fully formed by Thursday evening. Only the first trade ended with a loss; in the other cases, the pair moved at least 20 pips in the right direction, allowing traders to set their Stop Loss to breakeven.
COT Report
COT (Commitment of Traders) reports on the British pound show that commercial traders' sentiment has constantly shifted in recent years. The red and blue lines, representing net positions of commercial and non-commercial traders, frequently intersect and often stay close to the zero level. Currently, they are near each other again, indicating a roughly balanced number of long and short positions.
The dollar continues to decline due to Donald Trump's policies, so market makers' interest in the pound is not particularly relevant at the moment. If the global trade war continues to de-escalate, the dollar might have a chance to strengthen, but that chance still needs to be realized.
According to the latest report, the non-commercial group closed 4,800 long contracts and 2,800 short contracts. As a result, the net position of non-commercial traders declined by 2,000 contracts.
There are still no fundamental grounds for long-term purchases of the British pound, and the currency may continue its broader downtrend. The pound has recently risen sharply, mainly due to Trump's political influence. Once that factor fades, the dollar could regain strength. The pound has no independent reason to rise.
GBP/USD 1-Hour Analysis
In the hourly timeframe, the GBP/USD pair broke out of its sideways range, this time through the upper boundary. Further movement now depends entirely on Donald Trump and the development of the global trade war. However, we can also say that the movement is influenced by the market's overall sentiment toward America and its president. At this moment, that sentiment remains sharply negative. The dollar is once again falling—this time without any specific reasons.
For May 22, we identify the following important levels: 1.2691–1.2701, 1.2796–1.2816, 1.2863, 1.2981–1.2987, 1.3050, 1.3125, 1.3212, 1.3288, 1.3358, 1.3439, 1.3489, 1.3537. The Senkou Span B (1.3269) and Kijun-sen (1.3358) lines may also serve as signal levels. A Stop Loss is recommended to be placed at breakeven once the price moves 20 pips in the desired direction. Ichimoku indicator lines may shift during the day and should be monitored when interpreting trading signals.
On Thursday, the UK and the US will release May's business activity indices in the services and manufacturing sectors. These are, at the very least, interesting reports. They are unlikely to eliminate the market's persistent desire to sell the dollar but may influence intraday pair movements. These reports should be observed. With the pound breaking out of its sideways range, we can anticipate a continuation of the uptrend that has been established over the past four months.
Illustration Explanations:
- Support and resistance price levels – thick red lines where movement may end. They are not trading signal sources.
- Kijun-sen and Senkou Span B lines—These are strong Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour one.
- Extremum levels – thin red lines where the price has previously rebounded. These act as trading signal sources.
- Yellow lines – trend lines, trend channels, and other technical patterns.
- COT Indicator 1 on the charts – the size of the net position for each category of traders.
