Analysis of GBP/USD 5M
On Monday, the GBP/USD pair surged sharply within just five minutes in response to Trump's statements about successful negotiations with Iran, which may soon allow for the end of the war in the Middle East. There were no interesting developments throughout the day, but one statement from the US president was enough. Despite Tehran contradicting the American president's statements within half an hour, the market believed Trump. At least, they believed that the leader of the White House wanted to end the war. If so, that at least creates a faint possibility for unblocking the Strait of Hormuz in the foreseeable future.
The pound sterling rose, the US dollar fell, but the situation could change back today. A new bombardment from Iran, new attacks from Iran, new statements from Trump regarding negotiations—any news could provoke a decline as strong as Monday's rise. Formally, the GBP/USD pair is in an upward trend at the moment. If tankers start passing through the Strait of Hormuz, it would indicate that the war is moving toward de-escalation. In this case, the dollar would lose its almost sole supporting factor.
On the 5-minute timeframe, the movements on Monday made opening trades little sense. It became clear that smooth, predictable movements would be absent, especially after Trump's remarks. However, even prior to the American president's statement, the market was jumping around, ignoring all technical levels, areas, and lines. After Trump's announcement, prices flew in various directions, and there was no opportunity to react.
COT Report
COT reports for the British pound show that traders' sentiment has been fluctuating constantly in recent years. The red and blue lines, which depict the net positions of commercial and non-commercial traders, frequently cross each other and are often near the zero mark. Currently, these lines are diverging, with non-commercial traders dominating with... sell positions. However, given the events in the Middle East, it is not surprising that demand for riskier currencies is falling while demand for the dollar is increasing.
In the long term, the dollar continues to decline due to Trump's policies, as seen clearly on the weekly timeframe. The trade war will continue in one form or another for a long time, and the Fed will, in any case, resume easing monetary policy. Demand for the dollar will decline in the future regardless. However, geopolitical factors are currently at the forefront, providing strong support for the US currency. According to the latest COT report (dated March 17), the "Non-commercial" group closed 4,900 BUY contracts and 23,700 SELL contracts. As a result, the net position of non-commercial traders increased by 18,800 contracts over the week.
Analysis of GBP/USD 1H
On the hourly timeframe, the GBP/USD pair finally began to rise, breaking the downward trend, and now has a real chance of recovering losses from the last month and a half. Despite the strong decline in the pair during February-March, we still view it as a correction. The daily timeframe confidently signals the preservation of an upward trend. Unfortunately, geopolitics remains quite complex and could provoke movement in either direction.
For March 24, we highlight the following important levels: 1.3096-1.3115, 1.3201-1.3212, 1.3369-1.3377, 1.3465-1.3480, 1.3533-1.3548, 1.3615, 1.3671-1.3681, 1.3751-1.3763. The Senkou Span B line (1.3350) and Kijun-sen line (1.3360) may also provide signals. It is recommended to set the Stop Loss at breakeven if the price moves in the correct direction by 20 pips. The Ichimoku indicator lines may shift during the day, which should be considered when determining trading signals.
On Tuesday, business activity indices for the services and manufacturing sectors will be published in the UK and the US. In our opinion, market attention will be fully focused on geopolitics following Trump's statements on Monday. They will either be confirmed (the pound will continue to rise) or not (the dollar may rise again).
Trading Recommendations:
On Tuesday, traders may consider short positions if the price bounces from the 1.3465-1.3480 area, targeting 1.3350-1.3377. Long positions can be opened with targets at 1.3533-1.3548 and 1.3615 if the price breaks through the 1.3465-1.3480 area.
Explanations for Illustrations:
Support and resistance price levels are thick red lines near which movement may end. They are not sources of trading signals.
The 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.
Extreme levels are thin red lines from which the price has previously bounced. They are sources of trading signals.
Yellow lines indicate trend lines, trend channels, and any other technical patterns.
Indicator 1 on COT charts represents the size of the net position for each category of traders.
