GBP/USD Analysis on 5M Timeframe

The GBP/USD currency pair continued a significant downward trend for most of Wednesday. Recall that just days earlier, UK Treasury Chief Rachel Reeves delivered a speech that is already renowned for provoking declines in the British currency. This was the case again on Tuesday, although Reeves' statements were relatively harmless and did not suggest such a sharp drop in the British pound. Nevertheless, the market continues to trade illogically and sell the pound for trivial reasons. Hence, we were not surprised by yet another unfounded decline in the British currency.

From a technical perspective, a new descending trend line has formed on the hourly timeframe, which now serves as a reference for traders. As we expect only an increase in the pair, breaking this trend line can be used to identify the end of the short-term trend. However, we remind that a flat state is currently maintained on the daily timeframe, and the British pound may yet decline by a couple of hundred points without impacting the flat or the upward trend expected in 2025. Also, we note that this article does not discuss the outcomes of the FOMC meeting or any movements in the GBP/USD pair following that event.

On the 5-minute timeframe, there are no trading signals to identify. Since Tuesday, the price has not attempted to stop or correct; it has simply continued to fall. Therefore, short positions could have remained open after the sell signal at the 1.3307 level. It is unlikely anyone anticipated such a significant drop from a completely banal and routine event.

COT Report

COT reports for the British pound show a continually changing sentiment among commercial traders in recent years. The red and blue lines, reflecting the net positions of commercial and non-commercial traders, frequently intersect and are generally close to the zero mark. Currently, they are almost at the same level, indicating a nearly equal number of buy and sell positions.

The dollar continues to decline due to Donald Trump's policies; therefore, the demand from market makers for the British pound is not particularly significant at this moment. The trade war is expected to continue in one form or another for a long time. The Federal Reserve is likely to cut rates in the coming year, and demand for the dollar will decline regardless. According to the latest report on the British pound, the "Non-commercial" group opened 3,700 BUY contracts and closed 900 SELL contracts. Thus, the net position of non-commercial traders increased by 4,600 contracts over the week.

In 2025, the pound rose significantly, but it's important to understand that the reason is singular—Donald Trump's policies. Once this factor is mitigated, the dollar could start rising, but no one knows when that will happen. The growth or decline of the net position on the pound is not critical. Meanwhile, the dollar has consistently declined, generally at a faster pace.

GBP/USD Analysis on 1H Timeframe

On the hourly timeframe, the GBP/USD pair has begun forming a new downward trend. The dollar still has no global reasons to strengthen, so we expect the pair to rise to the 2025 highs in virtually any scenario. The main goal is to see the flat on the daily timeframe conclude as soon as possible. However, the trend on the hourly timeframe is now downward, so at the very least we should expect to break the trend line and the Senkou Span B line, providing technical grounds for anticipating a rise in the British currency.

For October 30, we highlight the following key levels: 1.3125, 1.3212, 1.3307, 1.3369-1.3377, 1.3420, 1.3533-1.3548, 1.3584, 1.3681, 1.3763, 1.3833, 1.3886. The Senkou Span B line (1.3358) and the Kijun-sen line (1.3281) may also serve as sources of signals. It is recommended to set the Stop Loss to breakeven once the price has moved favorably by 20 pips. The Ichimoku indicator lines may shift throughout the day, which should be accounted for when determining trading signals.

On Thursday, no significant events or reports are scheduled in the US or the UK, but last night's FOMC meeting could create relatively high volatility today.

Trading Recommendations:

Today, traders can operate at 1.3212. Technically, the trend is once again downward, but the price could move in either direction today. The market will spend much of the day reacting to the FOMC meeting and Powell's speech.

Explanations for the Illustrations:

• Support and Resistance Levels: Thick red lines where movement may end. They do not provide trading signals.
• Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour. They are strong lines.
• Extreme Levels: Thin red lines where 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.