GBP/USD 5M Analysis

The GBP/USD pair continued to show a decline on Thursday. This week, the British currency has been falling like a stone, and the reasons for this movement still raise many questions. We do not believe that Rachel Reeves's remarks about the UK moving closer to the European Union provide sufficient grounds to abandon the pound sterling. We also do not think that the "dovish" decision of the Fed and Powell's refusal to promise the market a rate cut in December, in the complete absence of key reports, are strong arguments for buying the dollar. However, the flat on the daily timeframe continues. The price has dropped to its lower boundary —now, attention! Either the flat will end, which would be logical, and we will see a strong upward movement in the pair, or the price will break out of the sideways channel and continue its illogical decline.

Yesterday, there were no interesting events in the UK or the US, which did not spare the pound from further losses. On the hourly timeframe, there are no technical questions, as we have a formed downward trend supported by the trend line. The price tested the 1.3125 level yesterday, where the decline could end. However, to confidently anticipate the beginning of a new upward move, we need to see a breakout of the trend line and the Ichimoku lines. For now, we can only assume the decline is still ongoing.

On the 5-minute timeframe, two trading signals were formed yesterday. At the beginning of the European trading session, the price rebounded from 1.3212, and at the start of the American session, it reached the nearest target at 1.3125. As a result, traders could have earned about 60 pips on a single short position. The bounce from the 1.3125 level could also be taken as a long position. By the evening, this position could be closed for profit or have a Stop Loss set to breakeven in anticipation of further growth.

COT Report

COT reports for the British pound show that sentiment among commercial traders has been changing steadily in recent years. The red and blue lines indicating the net positions of commercial and non-commercial traders frequently intersect and are mainly near the zero mark. Currently, they are almost at the same level, indicating roughly equal numbers of buy and sell positions.

The dollar continues to decline due to Donald Trump's policies, so the demand from market makers for the British pound is not particularly significant at this moment. The trade war will continue in one form or another for some time. The Fed will likely lower rates within the next year. The demand for the dollar will inevitably decline. According to the last 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 increased significantly, but it should be understood that the reason is singular—Donald Trump's policies. Once this factor is mitigated, the dollar may begin to rise, but no one knows when that will happen. It does not matter how fast the net position for the pound is growing or falling. The dollar is consistently declining, generally at a faster pace.

GBP/USD 1H Analysis

On the hourly timeframe, the GBP/USD pair continues to form a new downward trend. The dollar still lacks global reasons to strengthen, so we expect the pair to rise to the 2025 highs in virtually any case. The main thing is for the flat on the daily timeframe to conclude as soon as possible. However, the trend on the hourly timeframe is now downward, so we need to expect at least a breakout of the trend line and the Senkou Span B line to have technical grounds for anticipating a rise in the British currency.

For October 31, we highlight the following important levels: 1.3050, 1.3125, 1.3212, 1.3307, 1.3369-1.3377, 1.3420, 1.3533-1.3548, 1.3584, 1.3681. The Senkou Span B line (1.3358) and Kijun-sen line (1.3242) may also serve as sources of signals. It is recommended to set the Stop Loss to breakeven when the price moves favorably by 20 pips. The Ichimoku indicator lines may shift throughout the day, which should be taken into account when determining trading signals.

On Friday, no significant events or reports are scheduled for the US or the UK, and it is difficult to imagine what reasons the market could use for further selling the British currency.

Trading Recommendations:

Today, traders can trade from the level of 1.3125, around which a buy signal was formed just yesterday. Short positions will become relevant on a bounce from 1.3212 or on a consolidation below 1.3125, targeting 1.3050.

Explanations for the Illustrations:

• Support and Resistance Levels: Thick red lines where movement may end; these 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 previously bounced; these are sources of trading signals.
• Yellow Lines: Trend lines, trend channels, and other technical patterns.
• Indicator 1 on COT Charts: The size of the net position for each category of traders.