GBP/USD 5-Minute Analysis

The GBP/USD currency pair broke out of its sideways channel through the upper boundary, but it is in no hurry to continue rising. Traders appear to be gathering momentum for a new upward surge, which seems highly likely. This move may occur in the very near future. When the price approaches key levels, it typically jumps sharply or bounces back. This time, we see neither near the 1.3439 level. The price hasn't bounced off this mark, suggesting that traders have no intention of selling the pair even at such elevated levels. The British pound continues to perform better than the euro.

Yesterday, business activity indices created problems only for the euro; in contrast, they supported the pound. Although the manufacturing sector was disappointing again, the services sector came to its rescue. Strictly speaking, UK macro data was quite weak and shouldn't have supported the pound. But as we know, it doesn't take much for the dollar to fall right now—and against the British pound, it's falling even more energetically.

In the 5-minute timeframe, macroeconomic data did not generate false signals. The pair bounced twice from the 1.3439 level and moved at least 20 pips in the desired direction in both instances. Volatility was quite low, and it was clear that the market had no appetite to sell the pair. So, the absence of losses was already a positive. The second signal offered the opportunity to earn a few dozen pips.

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

On the hourly chart, GBP/USD broke out of its sideways channel through the upper boundary. Further movement depends entirely on Donald Trump and the evolving global trade war. However, it is equally valid to say that the pair's movement depends on the general sentiment and the market's attitude toward America and its president. At present, that sentiment remains decisively negative. The dollar continues to decline, now even without specific catalysts.

For May 23, we highlight 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. Senkou Span B (1.3269) and Kijun-sen (1.3358) lines can also be sources of signals. Ichimoku lines may shift throughout the day and should be considered when determining trading signals. Stop Loss levels should be moved to breakeven once the price moves 20 pips in the correct direction to protect against potential losses in case of a false signal.

UK retail sales data will be released on Friday, although this is objectively less significant than the business activity indices. Thus, if the report disappoints, the U.S. dollar may only recover slightly. No significant economic events are scheduled in the U.S. for the day. From a technical perspective, we expect the pair to break through the 1.3439 level, opening the path for the British pound to reach new highs.

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.