The GBP/USD pair resumed its downward movement on Wednesday after rebounding from the critical Kijun-sen line. Thus, the nature of the British currency's decline on Wednesday can be considered technical. There were no important reports in the UK yesterday, and the market processed the US reports in a biased and unjust manner. If they were processed at all, it was more of a reaction to the rebound from the Kijun-sen line. In the US, two reports that warranted attention were published. The ADP report on the US labor market significantly missed expectations, while the ISM services activity index supported its manufacturing counterpart in a positive dynamic. It is difficult for us to explain why the market deemed the ISM report more important than the ADP report, considering that Non-Farm Payrolls and the unemployment figures will not be released this week. However, they will still be published next week, and the ADP report is indeed not the most accurate and reliable.
On the hourly timeframe, the upward trend has not been invalidated, as the price has not consolidated below the Senkou Span B line. If a consolidation occurs, the likelihood of a more significant decline in the British pound will increase. Today, the results of the Bank of England meeting will be announced, and traders may react only to the outcomes of the Monetary Policy Committee's voting on the rate. However, we do not believe that the reaction will be strong.
On the 5-minute timeframe, yesterday, two trading signals were formed. During the European trading session, the price rebounded from the critical line, allowing short positions to be opened. During the American session, the 1.3671-1.3681 area was breached, allowing traders to keep their shorts open. The trade could have been manually closed in the evening, resulting in a profit of about 60 pips.
The COT reports for the British pound show that market sentiment among commercial traders has been constantly changing in recent years. The red and blue lines, reflecting the net positions of commercial and non-commercial traders, frequently intersect and are mostly near the zero mark. Currently, the lines are converging, with non-commercial traders still dominating... sales. Recently, speculators have begun building long positions, so a change in sentiment may soon occur, though this is unlikely to have much impact on the GBP/USD pair.
The dollar continues to decline due to Donald Trump's policies, as shown on the weekly timeframe (illustration above). The trade war will continue in one form or another for a long time, and the Fed will lower rates in the coming 12 months. Demand for the dollar will decrease in any case. According to the latest COT report (dated January 27) on the British pound, the "Non-commercial" group opened 6,500 BUY contracts and 600 SELL contracts. Therefore, the net position of non-commercial traders increased by 5,900 contracts over the week.
In 2025, the pound rose significantly, but it should be understood that there is only one reason for this: Donald Trump's policies. Once this reason is neutralized, the dollar may start to appreciate. But when this will happen, no one knows.
On the hourly timeframe, the GBP/USD pair continues to form an upward trend. The British pound reached last year's highs with relative ease and is now poised to rise further. However, it has decided to correct first. A breach of the Senkou Span B line indicates a shift in trend to the downside. The fundamental and macroeconomic background continues to support anything but the dollar.
For February 5, we highlight the following important levels: 1.3201-1.3212, 1.3307, 1.3369-1.3377, 1.3437, 1.3533-1.3548, 1.3615, 1.3671-1.3681, 1.3751-1.3763, 1.3846-1.3886, 1.3948. The Senkou Span B line (1.3633) and Kijun-sen (1.3733) may also serve as sources of signals. It is recommended to set the Stop Loss to break-even if the price moves in the correct direction by 20 pips. The Ichimoku indicator lines may shift throughout the day, which should be taken into account when determining trading signals.
On Thursday, the UK will announce the results of the Bank of England's first meeting of the year. It is expected that the decision will be made to keep the key rate unchanged. The British pound may react only to unexpected results from the Monetary Policy Committee's voting on the rate.
Today, traders may consider short positions targeting 1.3533-1.3548 if the price consolidates below the 1.3615-1.3633 range. Long positions will become relevant with a target of 1.3751-1.3763 if the price bounces from the Senkou Span B line.
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