Analysis of GBP/USD 5M

The GBP/USD currency pair showed no interesting movements on Friday. Even relatively important reports on retail sales in the UK and consumer sentiment in the U.S. did not help. On the 5-minute timeframe, it is clear that the price ignored the 1.3369-1.3377 area and the Kijun-sen line throughout the day. This happens when the market is in a "calm" phase. And indeed, the market was calm—the day's overall volatility was just 37 pips.

From a technical perspective, the situation on the hourly timeframe is even more interesting. During this super-important week, the only thing the market showed was a flat. The GBP/USD pair is now trapped between 1.3307 and 1.3437, and last week closed right in the middle of this sideways channel. Thus, we have formed not just a flat, but a flat in a square. How long it will take to exit this sideways channel is unclear, given the extremely low number of significant events this week and the holiday status of the upcoming week. Moreover, we already know that important events and reports do not necessarily lead to strong movements.

On the 5-minute timeframe, several signals were formed on Friday, but there was no point in acting on them, as movements were absent. Overall, this was evident by the beginning of the U.S. trading session. Thus, there were no grounds for traders to enter the market.

COT Report

COT reports for the British pound show that commercial traders' sentiment has been constantly changing in recent years. The red and blue lines representing the net positions of commercial and non-commercial traders frequently intersect and are often close to the zero mark. Currently, the lines are moving apart, indicating the dominance of pound buyers.

The dollar continues to decline due to Donald Trump's policies, which is clearly visible on the weekly timeframe. The trade war will continue in one form or another for a long time. The Federal Reserve will likely lower rates in the next 12 months, which will continue to decrease demand for the dollar. According to the last COT report (dated December 9) for the British pound, the "Non-commercial" group opened 8,000 buy contracts and 3,400 sell contracts. Consequently, the net position of non-commercial traders increased by 4,600 contracts over the week.

In 2025, the pound has risen significantly, but it is important to understand that this is solely due to Trump's policies. Once this reason is mitigated, the dollar may start to strengthen, but when that will occur is uncertain. It does not matter how fast the net position for the pound grows or declines (if it declines). For the dollar, it is decreasing anyway, and, as a rule, at a faster pace.

Analysis of GBP/USD 1H

On the hourly timeframe, the GBP/USD pair formed a flat between 1.3307 and 1.3437, so the further direction of movement will be determined once the price exits this sideways channel. We believe that medium-term growth will continue regardless of the local macroeconomic and fundamental backdrop, but in the next two weeks, movements may again be weak due to the holidays.

On December 22, we highlight the following important levels for trading: 1.2863, 1.2981-1.2987, 1.3042-1.3050, 1.3096-1.3115, 1.3201-1.3212, 1.3307, 1.3369-1.3377, 1.3437, 1.3533-1.3548, and 1.3584. The Senkou Span B line (1.3309) and Kijun-sen line (1.3383) may also serve as sources of signals. It is recommended to set the Stop Loss level at breakeven if the price moves in the desired direction by 20 pips, which will protect against potential losses if the signal turns out to be false.

On Monday, the UK's third-quarter GDP report, in its third estimate, will be published. We do not expect this report to provoke significant price fluctuations, but it is still worth noting. The calendar is empty in the U.S., so we may see yet another "boring Monday."

Trading Recommendations:

Traders can consider selling if the price consolidates below the 1.3369-1.3377 area, with a target at 1.3307. Long positions will become relevant if the price consolidates above the 1.3369-1.3377 area, with a target at 1.3437.

Explanations for the Illustrations:

• Support and Resistance Levels – Thick red lines around which movement may end. They are not sources of trading signals.
• Kijun-sen and Senkou Span B Lines – Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour timeframe. They are strong lines.
• Extreme Levels – Thin red lines from which the price previously rebounded. They are sources of trading signals.
• Yellow Lines – Trend lines, trend channels, and any other technical patterns.
• Indicator 1 on COT Charts – The size of the net position for each category of traders.