Analysis of GBP/USD 5M

On Wednesday, GBP/USD did not make any attempt to extend its downward movement. The market considered that two days of bearish trading are enough, and it wasn't worth it to open positions ahead of the Bank of England meeting on Thursday. Therefore, the pound did not fall. The pair left the ascending channel a week ago, and nothing has happened since then. The pound is once again trading near its local highs and can't even update the last local low. The fundamental and macroeconomic background in the US and UK were absent on Monday, Tuesday and Wednesday, so it is understandable that the GBP/USD pair went through low volatility.

The pair remains above the Senkou Span B line, which means that the upward trend persists on the hourly timeframe. Today, the pound may start to rise again, if the market decides to interpret any information from the BoE the way it wants. Recall that for the last 6-9 months we have repeatedly faced a situation where news or reports imply that the pound should fall, but instead the market decides to buy the British currency. Therefore, logical movements are still out of the question. The pound should fall in the medium term and drop at least to the level of 1.2000. It is unclear how much more time it will take for this to happen if the market refuses to sell the pound.

No trading signals were formed on the 5-minute timeframe. The price surpassed the level of 1.2512, but at the opening of the European trading session, it moved away from the point of formation for a decent distance, and there was also no sign that the pound would fall further. Therefore, the best decision was to not enter the market on Wednesday.

COT report:

COT reports on the British pound show that the sentiment of commercial traders often changes in recent years. The red and blue lines, which represent the net positions of commercial and non-commercial traders, constantly intersect and, in most cases, remain close to the zero mark. According to the latest report on the British pound, the non-commercial group closed 4,800 buy contracts and 2,000 short ones. As a result, the net position of non-commercial traders decreased by another 2,800 contracts in a week. Sellers continue to hold their ground. The fundamental background still does not provide a basis for long-term purchases of the pound sterling, and the currency finally has a real chance to resume the global downward trend. The trend line on the 24-hour TF clearly shows this. Almost all of the factors point to the pound's decline.

The non-commercial group currently has a total of 43,700 buy contracts and 72,700 sell contracts. Now the bears are in control and the pound has a huge potential to fall. We can only hope that inflation in the UK does not accelerate, or that the Bank of England will not intervene.

Analysis of GBP/USD 1H

On the 1H chart, GBP/USD continues to go through a bullish correction, which could turn into anything. Since the price could not overcome the area of 1.2605-1.2620, there are hopes of bringing back the downward trend in the medium-term. However, the results of the BoE meeting will be announced today, which could be absolutely anything. The market could show a strong reaction. We have long been accustomed to the market interpreting any controversial data in favor of the pound.

As of May 9, we highlight the following important levels: 1,2215, 1,2269, 1,2349, 1,2429-1,2445, 1,2516, 1,2605-1,2620, 1,2691-1,2701, 1,2786, 1,2863, 1,2981-1,2987. Senkou Span B (1.2433) and Kijun-sen (1.2549) lines can also serve as sources of signals. Don't forget to set a Stop Loss to breakeven if the price has moved in the intended direction by 20 pips. The Ichimoku indicator lines may move during the day, so this should be taken into account when determining trading signals.

Today, the results of the BoE meeting, the outcome of the Monetary Committee's rate vote, as well as BoE Governor Andrew Bailey's speech are the main events. Naturally, these events will provoke volatility in the market, even if there are no important decisions made. The pound will continue to fall only if Bailey's rhetoric is unambiguously dovish. Otherwise, the pound may rise. The US docket will only feature a minor report on jobless claims.

Description of the chart:

Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;

The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;

Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;

Yellow lines are trend lines, trend channels, and any other technical patterns;

Indicator 1 on the COT charts is the net position size for each category of traders;