Analysis of GBP/USD 5M

The GBP/USD currency pair avoided a new decline on Friday, though in the first half of the day, it was poised to extend its decline. There were no significant news events in the UK or the US throughout the day, so the market sold the British pound again on technical grounds. However, while the European currency is sufficiently distant from the lower boundary of its flat on the daily timeframe, the British pound has approached it closely, having tested it three times. Thus, the GBP/USD pair may transition to a rise supported by macroeconomic and fundamental backgrounds. We recall that throughout October, we observed movements that were completely illogical and often openly contradicted reports and news.

From a technical perspective, the downward trend on the hourly timeframe remains, as indicated by the trend line. Therefore, the market will require considerable effort to break the current downward trend. The Bank of England meeting is scheduled for this week, and the central bank does not plan to lower the key interest rate. However, it is still unclear whether the market is ready to start logically responding to the fundamental and macroeconomic backdrop.

On the 5-minute timeframe, three trading signals were formed on Friday, but the price moved very randomly throughout the day. The first two signals turned out to be false, but in the second case, the price did move in the desired direction by about 20 pips. Therefore, a loss could have only been incurred from the first trade. The third buy signal formed too late, almost right before the market closed for the weekend, so it clearly should not have been acted upon.

COT Report

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

The dollar continues to decline due to Donald Trump's policies, so, in principle, the market makers' demand for the British pound is not too significant at this moment. The trade war will continue in one form or another for a long time. The Fed will lower rates anyway in the coming year. The demand for the dollar will fall in any case. According to the latest report (dated September 23) 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. However, this data is already outdated, and there are no new reports.

In 2025, the pound experienced a significant rise, but it is essential to understand that the reason is one: Donald Trump's policies. Once this reason is neutralized, the dollar may begin to rise, but when that will happen is unknown. It does not matter how quickly the net position for the pound is rising or falling. For the dollar, it is decreasing anyway and tends to do so at a higher rate.

Analysis of GBP/USD 1H

On the hourly timeframe, the GBP/USD pair continues to form a new downward trend. The dollar still has no global reasons to strengthen, so we expect the pair to rise towards the 2025 highs in almost any scenario. The key point is that the flat trend on the daily timeframe should conclude as soon as possible. However, on the hourly timeframe, the trend is now downward; thus, we should at least wait for a breakthrough of the trend line and the Senkou Span B line to have technical grounds to expect a rise in the British currency.

As of November 3, 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 (1.3379) and the Kijun-sen line (1.3232) may also serve as sources of signals. It is recommended to set the Stop Loss at breakeven when the price moves in the right direction by 20 pips. The Ichimoku indicator lines may shift throughout the day, which should be taken into account when determining trading signals.

On Monday, business activity indices for the manufacturing sectors are scheduled for release in the UK and the US, but only the American ISM is genuinely interesting.

Trading Recommendations:

Today, traders can trade from the 1.3125 level, around which a buy signal was formed last Friday. Short positions will become relevant if the price solidifies below the 1.3125 level, targeting 1.3050.

Explanations for the Illustrations:

• Support and resistance price levels are represented by thick red lines, near which movement may end. They are not sources of trading signals.
• Kijun-sen and Senkou Span B lines are Ichimoku indicator lines transferred from the 4-hour timeframe to the hourly timeframe. They are strong lines.
• Extremum levels are indicated by thin red lines, from which the price has previously bounced. They are sources of trading signals.
• Yellow lines represent trendlines, trend channels, and any other technical patterns.
• Indicator 1 on the COT charts shows the size of each category of traders' net position.