GBP/USD 5-Minute Analysis

On Friday, the GBP/USD currency pair experienced a downward movement following a sharp rise on Thursday. It's important to note that there were no fundamental reasons to buy the British pound or the euro on Thursday. However, the macroeconomic environment on Friday was dense and varied, making it initially unclear whether to buy or sell.

The day began with the release of the UK retail sales report, which showed a month-over-month increase of 1.7% in January, significantly surpassing forecasts. In annual terms, the increase stood at 1%, which also exceeded traders' expectations. At first glance, these figures should have enabled the pound to continue its upward trend smoothly. However, the manufacturing sector's business activity index fell from 48.3 to 46.4, even though traders had anticipated a rise to 48.4. Although the services sector index rose by 0.3 points, the manufacturing index carries slightly more weight.

In our view, technical factors prevailed over macroeconomic data on Friday, much like the previous week when the pound was rising actively. However, this increase in the British pound feels like its "last gasp." In the 4-hour timeframe, the CCI indicator entered the overbought zone, and the pound's 500-pip increase over the past month now seems excessive.

There were no significant trading signals on Friday, and volatility remained low. The price declined throughout the day, approaching the support area at 1.2605-1.2620, but it did not reach that level before the market closed for the weekend. As a result, traders had no clear basis for opening positions on Friday.

COT Report

COT reports for the British pound reveal that the sentiment among commercial traders has been shifting consistently in recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, often cross and generally hover around the zero mark. Currently, these lines are once again close to each other, indicating an almost equal number of long and short positions.

On the weekly timeframe, the price initially broke through the 1.3154 level before declining toward the trendline, which it successfully breached. This breach suggests that the pound's decline is likely to continue. However, there was also a rebound from the previous local minimum on the weekly timeframe, which may indicate a flat market.

According to the latest COT report on the British pound, the non-commercial group opened 4,500 buy contracts and 1,800 sell contracts. As a result, the net position of non-commercial traders increased by 2,700 contracts over the week, which does not significantly benefit the pound.

The fundamental background still does not provide any justification for long-term purchases of the pound sterling, and the currency remains at risk of continuing its global downtrend. This suggests that the net position could continue to decline, indicating further weakening demand for the pound.

GBP/USD 1-Hour Analysis

The GBP/USD pair continues its upward, almost uninterrupted trend on the hourly timeframe. This may not be the last trend in alternating trends within the broader upward correction seen in the daily timeframe. We still see no fundamental basis for sustained pound growth in the long term. We would not recommend long positions on higher timeframes and from a long-term perspective. The pound's position is not fundamentally strong. Even in the last two weeks, market movements have been illogical, with the pound rising primarily on technical factors.

For February 24, we highlight the following key levels: 1.2052, 1.2109, 1.2237-1.2255, 1.2331-1.2349, 1.2429-1.2445, 1.2511, 1.2605-1.2620, 1.2691-1.2701, 1.2796-1.2816. The Senkou Span B (1.2482) and Kijun-sen (1.2618) lines can also serve as sources of trading signals. A Stop Loss order should be set at breakeven if the price moves 20 pips in the correct direction. The Ichimoku indicator lines may shift throughout the day, so traders should consider this when identifying trading signals.

No significant events or reports are scheduled on Monday in the UK or the U.S., meaning strong market movements are unlikely. Nevertheless, we now expect the pound to decline based on the same technical factors that previously drove its rise.

Illustration Explanations:

• Support and Resistance Levels (thick red lines): Thick red lines indicate where movement may come to an end. Please note that these lines are not sources of trading signals.
• Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the 4-hour timeframe to the hourly timeframe. These are strong lines.
• Extreme Levels (thin red lines): Thin red lines where the price has previously bounced. These serve as sources of trading signals.
• Yellow Lines: Trendlines, trend channels, or any other technical patterns.
• Indicator 1 on COT Charts: Represents the net position size for each category of traders.