GBP/USD 5-Minute Analysis

On Thursday, the GBP/USD pair continued a weak downward move, which is corrective in nature. The British pound began to decline on August 14, a week ago. During this time, it lost 150 pips, which equals about 30 pips per day. As we can see, the decline of the British currency is weak. On the 4-hour TF, it is visible that the current movement is a correction. Thus, we are waiting for the correction to end and for the upward trend to resume.

This week, the macroeconomic background has been almost absent. Although several noteworthy reports were published in the UK, the most important one — on inflation — could have supported the British pound, but in the end, the downward correction continued. Yesterday, business activity data came out contradictory, and in the second half of the day, positive U.S. reports were published. As we already mentioned, these were secondary in importance, but they provoked another slight strengthening of the dollar. Now, the only event left this week is Jerome Powell's speech.

On the 5-minute TF, the first trading signals formed when the move had already essentially ended. First, the pair bounced from the 1.3420–1.3426 area, and then broke through it. Both signals turned out to be false. U.S. macroeconomic data triggered the decline that preceded these signals. Although the reports were unambiguous, it was unreasonable to expect a dollar strengthening of more than 50 pips from them.

COT Report

COT reports on the British pound show that in recent years, the sentiment of commercial traders has constantly shifted. The red and blue lines, which represent the net positions of commercial and non-commercial traders, frequently intersect and, in most cases, remain near the zero mark. At present, they have nearly converged again, indicating a roughly equal number of long and short positions.

The dollar continues to decline due to Trump's policies, so the demand of market makers for the pound is not particularly important right now. The trade war will continue in one form or another for a long time. Dollar demand will continue to decline. According to the latest report on the British pound, the "non-commercial" group opened 8,100 BUY contracts and 13,900 SELL contracts. Thus, the net position of non-commercial traders declined by another 5,800 contracts during the reporting week.

In 2025, the pound rose sharply, but it should be understood that there is only one reason: Trump's policy. Once this factor is neutralized, the dollar could move into growth, but no one knows when that will happen. It does not matter much how fast the net position for the pound grows or falls. The dollar is falling regardless, usually at a faster pace.

GBP/USD 1-Hour Analysis

On the hourly timeframe, the GBP/USD pair continues to correct within the upward trend, while on the daily TF it bounced from the important and strong Senkou Span B line. In our view, the fundamental background still does not favor the U.S. currency, so in the long term we expect the continuation of the "2025 trend." The dollar can still count on growth only within purely technical corrections, one of which we are currently observing.

For August 22, we highlight the following important levels: 1.3125, 1.3212, 1.3369–1.3377, 1.3420, 1.3509, 1.3615, 1.3681, 1.3763, 1.3833, 1.3886. The Senkou Span B line (1.3426) and the Kijun-sen line (1.3519) may also serve as sources of signals. A Stop Loss level is recommended to be set at breakeven once the price has moved 20 pips in the correct direction. The Ichimoku indicator lines may shift during the day, which should be taken into account when determining trading signals.

On Friday, no macroeconomic reports are scheduled, while Jerome Powell's speech will take place in Jackson Hole, which the market seems to have been awaiting since Monday. If Powell once again takes a hawkish stance, this may provide the dollar with a little more support. Although, in essence, this will not change anything. The Federal Reserve will cut rates anyway — sooner or later.

Trading Recommendations

We believe that on Friday the market will continue to show sluggish movements with minimal volatility, with a slight downward bias. After the trendline was broken, we do not consider the trend to have shifted into a downward one. The price worked off the Senkou Span B line, so the pound's decline may soon come to an end.

Illustration Explanations:

• Support and resistance price levels – thick red lines where movement may end. They are not trading signal sources.
• Kijun-sen and Senkou Span B lines—These are strong Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour one.
• Extremum levels – thin red lines where the price has previously rebounded. These act as trading signal sources.
• Yellow lines – trend lines, trend channels, and other technical patterns.
• COT Indicator 1 on the charts – the size of the net position for each category of traders.