COT reports

On Friday, the GBP/USD pair fell after strong US data. The first half of the day saw a similar flat movement as the euro, while the second half witnessed a decline. However, the GBP/USD pair maintains an uptrend, with the price still above the Ichimoku indicator lines. Therefore, it could trade higher this week, despite the complete absence of fundamental and macroeconomic reasons for such a move. We still believe that both the pound and the euro should be falling. It is possible that they corrected last week so that it can continue moving downward.       The trading signals for the pound were almost identical to those for the euro. During the European trading session, the price rebounded from the level of 1.2520 but failed to move in the right direction even by 20 pips. It was advisable to close the long position before the release of US data. Later, two sell signals formed near the same level, which traders could use to open a short position. Long positions were not recommended at that time as the reports clearly favored the dollar. Subsequently, the price dropped to the level of 1.2445, where the shorts should have been closed. The profit from them amounted to around 60 pips.     According to the latest report, non-commercial traders opened 1,100 long positions and closed 500 short ones. The net position increased by 600 and remained bullish. Over the past 9-10 months, the net position has been on the rise despite bearish sentiment. The pound is bullish against the greenback in the medium term, but there have been hardly any reasons for that. We assume that a prolonged bear run has begun. COT reports suggest a bullish continuation. However, we can hardly explain why the uptrend should go on.   Both major pairs are in correlation now. At the same time, the positive net position on EUR/USD shows the end of the uptrend. Meanwhile, the net position on GBP/USD is neutral. The pound has gained about 2,300 pips. Therefore, a bearish correction is now needed. Otherwise, a bullish continuation would make no sense even despite the lack of support from fundamental factors. Overall, non-commercial traders hold 57,000 sell positions and 70,300 long ones. We do not see the pair extending growth in the long term.     In the 1-hour time frame, the pair has started an upward movement, and even after Friday's decline, it remains above the Ichimoku indicator lines. The pound doesn't exactly have grounds to buy the pound, which remains heavily overbought. However, take note that the market has the right to trade regardless of the fundamental and macroeconomic backdrop.   For now, let's consider that we have seen a strong correction last week and expect a revival of the downward movement. On June 5, trading levels are seen at 1.2269, 1.2349, 1.2429-1.2445, 1.2520, 1.2589, 1.2666, 1.2762. The Senkou Span B line (1.2408) and the Kijun-sen line (1.2434) lines may also generate signals when the price either breaks or bounces off them.   A Stop Loss should be placed at the breakeven point when the price goes 20 pips in the right direction. Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance which can be used for locking in profits.   Today, both the UK and the US will release their respective Services PMIs for May. The UK data can influence traders' sentiment, as well as the US ISM data. Of course, it would be nice for the values of these data to deviate from the forecast, and the stronger the deviation, the stronger the market reaction may be.   Indicators on charts: Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals. The Kijun-sen and Senkou Span B lines are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines. Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals. Yellow lines are trend lines, trend channels, and other technical patterns. Indicator 1 on the COT chart is the size of the net position of each trader category. Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.  

COT reports on the British pound show that the sentiment of commercial traders has been changing quite frequently in recent months. The red and green lines, representing the net positions of commercial and non-commercial traders, often intersect and, in most cases, are not far from the zero mark. According to the latest report on the British pound, the non-commercial group closed 10,000 buy contracts and 4,200 short ones. As a result, the net position of non-commercial traders decreased by 5,800 contracts in a week. Since bulls currently don't have the advantage, we believe that the pound will not be able to sustain the upward movement for long . The fundamental backdrop still does not provide a basis for long-term purchases on the pound.   The non-commercial group currently has a total of 58,800 buy contracts and 44,700 sell contracts. Since the COT reports cannot make an accurate forecast of the market's behavior right now, and the fundamentals are practically the same for both currencies, we can only assess the technical picture and economic reports. The technical analysis suggests that we can expect a strong decline, and the economic reports have also been significantly stronger in the United States for quite some time now.   On the 1H chart, GBP/USD is making every effort to correct lower, but the uptrend remains intact. We believe that the British pound doesn't have any good reason to strengthen in the long-term. Therefore, at the very least, we expect the pair to return to the level of 1.2513. However, there are currently no sell signals, so the uptrend is still intact. On Tuesday, there are few reasons for the pair to show volatile movements. We may see a flat phase, a downtrend, or an uptrend (intraday), so we need to purely rely on technical analysis. We expect the pound to consolidate below the trendline, and in that case, we can consider selling while aiming for the Senkou Span B line. A n upward movement is theoretically possible today, but we see no reason for it, so you shouldn't consider buying at the moment. As of January 2, we highlight the following important levels: 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2513, 1.2605-1.2620, 1.2726, 1.2786, 1.2863, 1.2981-1.2987. The Senkou Span B line (1.2646) and the Kijun-sen (1.2753) lines can also be sources of signals. Don't forget to set a breakeven Stop Loss to breakeven if the price has moved in the intended direction by 20 pips. The Ichimoku indicator lines may move during the day, so this should be taken into account when determining trading signals. Today, the UK and the US will release their second estimates of business activity indices in the manufacturing sector for December. These are not significant reports so it is unlikely for traders to react to them. Description of the chart: Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals; The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals; Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals; Yellow lines are trend lines, trend channels, and any other technical patterns; Indicator 1 on the COT charts is the net position size for each category of traders; Indicator 2 on the COT charts is the net position size for the Non-commercial group.