GBP/USD 5-Minute Analysis
On Friday, the GBP/USD currency pair tried again to resume its mild downward movement, as the price had previously exited the ascending channel. Thus, from a technical point of view, a decline in the British currency should be expected. It is possible, but who believes in strengthening the dollar now that Trump raised tariffs again over the weekend? The new week will likely see the market again fleeing the dollar and U.S. assets. We may again find ourselves in a situation where the fundamental background overrides the technical picture.
As for the fundamental or macroeconomic background of the UK, it still has little to no influence on market sentiment. Even U.S. reports are not always properly reflected in market movements. Thus, Donald Trump continues to "rule the show." Recall that the U.S. president wanted to weaken the dollar during his first term. For those who don't remember, the dollar had strengthened against the euro and pound for 16 years. However, it seems that the "dollar era" is ending. Trump, at least, is doing everything he can to push the dollar as low as possible. Of course, the trade war was not started for the sake of a weaker dollar, but Trump essentially aims to kill two birds with one stone: weaken the dollar and get additional revenue for the budget via tariffs or deals.
On Friday, the pair formed two sell signals in the 5-minute timeframe. In both cases, the price rebounded from the 1.3489–1.3503 area. However, as volatility was low that day, the price only managed to move down by 25–30 pips. The nearest target level of 1.3439 was not reached, so profits could only be secured by manually closing the positions.
COT Report
COT reports for the British pound show that commercial traders' sentiment has constantly changed over the past few years. The red and blue lines, representing the net positions of commercial and non-commercial traders, cross frequently and generally hover near the zero mark. They are again close to each other, indicating an approximately equal number of long and short positions. However, the net position has been growing over the past year and a half.
The dollar continues to decline due to Trump's policies, so market makers' demand for the pound is currently not of major importance. If the de-escalation of the global trade war resumes, the dollar may have a slight chance to strengthen. According to the latest COT report for the British pound, the "Non-commercial" group opened 14,200 BUY contracts and 2,800 SELL contracts. Thus, the net position of non-commercial traders grew by 11,400 contracts.
The pound has grown significantly lately, but it's important to understand that the main reason is Trump's policies. Once this reason is neutralized, the dollar could recover — but no one knows when that will happen. The pound itself has no fundamental reasons for growth. Nevertheless, traders currently have more than enough "Trump factor" to make trading decisions.
GBP/USD 1-Hour Analysis
In the hourly timeframe, the GBP/USD pair maintains its upward trend despite exiting the trend channel. Further movement of the pair entirely depends on Trump and developments in the global trade war rather than technical analysis. The overall sentiment and market attitude toward America and its president remain sharply negative, making it extremely difficult for the dollar to strengthen. The dollar continues to fall regularly, and when tariff news emerges, it falls even harder.
For June 2, we highlight the following important levels: 1.2863, 1.2981–1.2987, 1.3050, 1.3125, 1.3212, 1.3288, 1.3358, 1.3439, 1.3489, 1.3537, 1.3637–1.3667, 1.3741. The Senkou Span B (1.3420) and Kijun-sen (1.3498) lines can also be sources of signals. Setting the Stop Loss at breakeven after the price moves 20 pips in the right direction is recommended. Ichimoku indicator lines can move during the day, which should be considered when determining trading signals.
On Monday, business activity reports in the manufacturing sector are scheduled for the U.S. and the UK. However, we believe that traders will remain under the strong impression of Trump's new tariff hike throughout the day. Thus, it seems that another fall in the American currency should be expected.
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.
