The GBP/USD currency pair continued its upward movement on Wednesday, which is clearly of a technical, corrective nature. However, it's worth noting that the euro is not rising. Both currency pairs are correcting, but only the pound is increasing, which is even harder to explain than the last wave of U.S. dollar strengthening. The forex market is chaotic. Most fundamental, geopolitical, and macroeconomic events are either ignored or selectively factored into the market. Currently, the British pound is rising, which we believe is a natural progression. However, if it were to drop by 200 pips tomorrow, analysts would immediately report that the market is still waiting for Federal Reserve rate hikes or does not believe the U.S.-Iran conflict will be resolved. In simpler terms, traders largely explain movements ex post rather than predict them. Yesterday's speeches by Kevin Warsh and Andrew Bailey did not yield any significant announcements, as expected. However, the ISM manufacturing index in the U.S. came in weaker than forecasts, which supported the British pound.
From a technical perspective, the price formed an upward trend, which cannot be called strong, but it's better than another decline for the pound. The price has reached the Senkou Span B line, so a breakout here would indicate the British currency's readiness to continue rising. We believe the anticipated Fed rate hike has already been priced in, so the British pound should at least recover from its two-month decline, which is part of the flat on the daily timeframe and part of the upward trend on the weekly timeframe.
On the 5-minute timeframe, no trading signals were formed on Wednesday. At the very beginning of the American trading session, the price was just 4 pips short of triggering the critical line, and a few hours later, it fell 7 pips short of triggering the Senkou Span B line.
COT reports for the British pound show that trader sentiment has fluctuated in recent years. The red and blue lines showing the net positions of commercial and non-commercial traders frequently intersect and are usually close to the zero mark. Currently, the lines are diverging, with non-commercial traders still holding net short positions. Given the events in the Middle East, it is unsurprising that demand for risk currencies is low.
In the long term, the dollar continues to weaken due to Donald Trump's policies, which can be clearly seen on the weekly timeframe (illustration above). The trade war will continue in some form for quite a while, and Trump's policies, both direct and indirect, aim to weaken the U.S. dollar. However, geopolitical factors currently take precedence, providing strong support for the dollar in 2026. Since the conflict in the Middle East is not yet resolved, the U.S. dollar may still see growth. According to the latest COT report (dated June 23), the "Non-commercial" group closed 1,300 BUY contracts and opened 32,900 SELL contracts. Thus, the net position of non-commercial traders fell by another 31,600 contracts over the week.
On the hourly timeframe, the GBP/USD pair has begun to recover and has formed an upward trend. So far, this trend can be considered a correction. However, in the long term, the British pound has no compelling reasons to decline, while the U.S. dollar has no compelling reasons to grow. The market continues to ignore most fundamental, geopolitical, and macroeconomic events, and on the daily timeframe, the pair is in the lower part of the trading range. Therefore, we still expect growth.
For July 2, we highlight the following important levels: 1.3042-1.3050, 1.3096-1.3115, 1.3179-1.3187, 1.3301-1.3309, 1.3369-1.3377, 1.3465-1.3480, 1.3588, and 1.3671-1.3681. The Senkou Span B line (1.3298) and Kijun-sen line (1.3234) could also be sources of signals. It is recommended to set the Stop Loss at breakeven once the price moves 20 pips in the right direction. The Ichimoku indicator lines may shift during the day, which should be taken into account when determining trading signals.
On Thursday, no important events or reports are scheduled in the UK; however, the U.S. will release labor market and unemployment reports, which the market (one of the few) typically pays attention to. Thus, volatility may increase in the second half of the day.
Today, traders may consider short positions targeting the Kijun-sen line and trend line if the pair bounces off the 1.3298-1.3309 area. Long positions can be opened upon consolidation above the 1.3298-1.3309 area with targets at 1.3369-1.3377. However, much will depend on the data from the U.S. today.
Price levels of support and resistance are represented by thick red lines, around which movement may end. They are not sources of trading signals.
The Kijun-sen and Senkou Span B lines are Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour timeframe. They are strong lines.
Extreme levels are represented by thin red lines from which the price previously bounced. They are sources of trading signals.
Yellow lines are trend lines, trend channels, and any other technical patterns.
Indicator 1 on the COT charts represents the size of the net position for each category of traders.
*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.
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