GBP/USD 5M Analysis
The GBP/USD currency pair traded with low volatility and primarily moved sideways. As mentioned earlier, last week was particularly interesting in how the market interpreted various events and publications. The market largely ignored important U.S. macroeconomic data on business activity, employment, and unemployment, yet responded to the emotional statements of British Chancellor Rachel Reeves. We maintain our view that the U.S. dollar currently has no real prospects for strong growth. After Friday and Saturday's developments involving Donald Trump, his legislative initiative, and Elon Musk, these prospects have diminished even further.
The only factor that could point to potential strengthening of the dollar is technical analysis. On the hourly timeframe, the price remains below the critical line. However, it's not declining—it simply stays below this reference point. In fact, over the past few days, the price has been edging closer to the Kijun-sen line, and will likely move above it in the coming week, thereby neutralizing any remaining technical support for the dollar. Fundamentally and globally, the U.S. currency lacks demand in the market due to well-known reasons we have been discussing for several months.
Surprisingly, one sell signal did form on Friday. Moreover, it even provided an opportunity for traders to profit. Early in the European session, the pair rebounded from the 1.3674–1.3681 level and then fell by 20–25 points. Traders could have captured this short-term move with a short position.
COT Report
The COT (Commitment of Traders) reports for the British pound show that commercial traders' sentiment has fluctuated significantly in recent years. The red and blue lines, which represent net positions of commercial and non-commercial traders, often intersect and typically stay near the zero mark. Currently, they remain close together, suggesting that buying and selling volumes are roughly balanced. However, the net position has been gradually increasing over the past 18 months.
The dollar continues to weaken due to Donald Trump's policies, so market maker demand for the pound is not especially relevant at the moment. The trade war is expected to continue in one form or another, and the Federal Reserve may cut its key rate more aggressively than justified by economic fundamentals. As a result, demand for the dollar is likely to decline further.
According to the latest COT report on the British pound, the "Non-commercial" group closed 6.4k buy positions and 2.0k sell positions. This led to a reduction of the net long position by 8.4k during the reporting week—though this has minimal significance in the broader context.
In 2025, the pound will rise significantly—but the primary reason for this is Donald Trump's policies. Once this factor is removed, the dollar may start to recover. However, no one knows when that might happen. Trump's presidency has only just begun, and the next four years could bring many more disruptions.
GBP/USD 1H Analysis
On the hourly timeframe, the GBP/USD pair experienced a sharp decline on Wednesday last week, but generally recovered in the following sessions. This means the British pound lost very little overall and is likely to rebound in the coming week. To do so, it needs to break above the critical line. The price also failed to consolidate below the Senkou Span B line, which is why we do not yet see a reason to consider the uptrend broken.
Key Trading Levels for July 7:
Support and resistance levels:1.3212, 1.3288, 1.3358, 1.3439, 1.3489, 1.3537, 1.3615, 1.3741–1.3763, 1.3833, 1.3886.
Ichimoku indicator lines:Senkou Span B (1.3569) and Kijun-sen (1.3674) may also serve as signal levels.
A Stop Loss should be moved to breakeven once the price moves 20 points in the correct direction. Ichimoku lines may shift throughout the day, which should be considered when identifying trading signals.
On Monday, no significant economic events are scheduled in either the UK or the US. Therefore, low-volatility trading may persist today. However, don't forget about the developments from Friday and Saturday, which may still be reflected in Monday's charts.
Chart Legend and Notation:
- Thick red lines – support/resistance levels where price may stall. These are not direct signal sources.
- Kijun-sen and Senkou Span B lines – Ichimoku indicator lines transferred from the 4H to the 1H timeframe. Considered strong levels.
- Thin red lines – local extrema where the price has previously bounced. These act as signal sources.
- Yellow lines – trendlines, channels, and other technical patterns.
- COT Indicator 1 – shows the net position size of each trader category.
