Analysis of GBP/USD 5M

The GBP/USD currency pair resumed its downward movement on Thursday, which this time resembled a collapse. The geopolitical factor, a new political crisis in the UK, and high US inflation are the reasons for the British pound's fall this week. We expected the drop to be completed in the area of 1.3465-1.3480; however, at this moment, it appears this did not occur. Thus, the trend on the hourly timeframe has changed to downward.

Should we expect further declines for the British currency? Given the current conditions, probably yes. The bulls did not hold the market, so the bears now dominate. We do not expect a trend similar to what was observed in February and March, but! Time is passing, negotiations are stalled, the Strait of Hormuz remains blocked, and the political crisis in the UK may end with yet another Prime Minister's resignation. The macroeconomic backdrop continues to be ignored by the market. Yesterday, the UK published reports on GDP and industrial production, and the US published a retail sales report. It is impossible to say that these reports provoked a strong decline in the pair.

On the 5-minute timeframe yesterday, one trading signal was formed. During the American trading session, the pair began to fall and breached the 1.3465-1.3480 area. Thus, traders had a good opportunity to open short positions targeting 1.3369-1.3377. Overall, we do not expect significant strengthening of the US dollar yet, but with a downward trend now, declines should be anticipated first and foremost.

Analysis of GBP/USD 4H

On the 4-hour timeframe, we analyze according to the ICT trading system. The British pound is very strongly correlated with the euro, just as Ethereum is with Bitcoin. Therefore, attention should always be paid to the patterns and signals of EUR/USD. And yesterday was just such a situation. A sell signal was generated for the euro, but none was generated for the British pound. However, both pairs showed a significant decline. The trend on the 4-hour timeframe has changed to downward as the CHOCH line was broken. Unfortunately, the nearest "bearish" pattern did not form, but after such a strong decline, new FVG patterns will emerge. The main task now is to quickly understand what caused the British pound's drop on Thursday.

Analysis of GBP/USD 1H

On the hourly timeframe, the GBP/USD pair has been declining throughout the current week. The sideways channel was not confirmed; the price did not remain within its range. The British pound is heading into a more pronounced correction for several reasons, including geopolitical factors. The macroeconomic and fundamental factors still have little influence on the pair's movements.

On May 15, we highlight the following important levels: 1.3096-1.3115, 1.3179-1.3187, 1.3369-1.3377, 1.3465-1.3480, 1.3588, 1.3671-1.3681, 1.3751-1.3763. The Senkou Span B line (1.3550) and Kijun-sen (1.3560) may also serve as sources for signals. It is recommended to place the Stop Loss at breakeven when the price moves in the correct direction by 20 pips. The Ichimoku indicator lines may shift during the day, which should be taken into account when determining trading signals.

On Friday, there are no important events or reports planned in the UK, while the US will release a report on industrial production. We do not believe this report will affect the pair's movement. Traders should continue to closely monitor geopolitics.

Trading Recommendations:

Today, traders may remain in short positions after the price consolidates below the 1.3465-1.3480 area, with a target of 1.3369-1.3377. Long positions can be opened if the price consolidates above the 1.3465-1.3480 area, targeting the Ichimoku indicator's lines. On the 4-hour timeframe, one should expect the formation of new "bearish" patterns and trade from them.

Explanations for the Illustrations:

• Support and Resistance Levels – Thick red lines at which market movement may end. These are not sources of trading signals.
• Kijun-sen and Senkou Span B Lines – Lines from the Ichimoku indicator transferred from the 4-hour timeframe to the hourly timeframe. These are considered strong lines.
• Extreme Levels – Thin red lines from which the price has previously bounced. These are sources of trading signals.
• Yellow Lines – Trend lines, trending channels, and any other technical patterns.
• CHOCH – Change of the trend structure.
• Liquidity – Liquidity, Stop Loss, and pending orders that market makers use to build their positions.
• FVG – Fair Value Gap. The price rapidly passes through such areas, indicating a complete absence of one party in the market. Subsequently, the price tends to return and react to these areas in alignment with the main trend.
• IFVG – Inverted Fair Value Gap. After returning to such an area, the price does not react from it; instead, it impulsively breaks through and then tests it from the other side.
• OB – Order Block. The candle on which the market maker opened a position aimed at capturing liquidity to form their position in the opposite direction.