The GBP/USD currency pair continued its downward movement on Monday, which can be attributed to the macroeconomic backdrop. Recall that one report each was published in the UK and the US yesterday regarding business activity in the manufacturing sector. However, the US report was important—ISM, which is published in a single estimate—while the UK report was not significant and was released in two estimates. As a result, the dollar gained a bit more value by the end of the day.
Overall, the currency market did not react to the new wave of protests in the US against Donald Trump, nor to the release of the "Epstein files," in which Trump's name also appears. While this is not the best topic for discussion, it is still a pretty serious scandal. However, the dollar is still ignoring new portions of negativity. Nevertheless, we have already noted that the current decline in the pair is purely technical. We still do not see reasons for a long-term increase in the American currency.
This week, the dollar will have to undergo a macroeconomic exam. If the ISM indices and the ADP and JOLTs reports are interesting and sufficiently significant reports, the NonFarm Payrolls and unemployment rate could determine future dynamics. Jerome Powell literally stated just last week that the US labor market is recovering, the economy is growing at a good pace, and inflation remains elevated. Thus, if the labor market does not disappoint the Fed and shows signs of recovery, the dollar could continue to rise. However, in our view, global fundamental factors will sooner or later drag the US currency down.
On the 5-minute timeframe, three trading signals were formed yesterday. First, the pair very imprecisely rebounded from the area of 1.3671-1.3681, managing to climb about 20 pips. Then it broke through the specified area and, as a bonus, rebounded from it from below. In these two cases, the price moved in the desired direction by 25 and 30 pips, respectively. The target level was not reached at any point. Monday was not the best day, but there were no losses on the trades.
The COT reports for the British pound show that commercial traders' sentiment has been changing steadily in recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, frequently cross and are mostly near the zero mark. Currently, the lines are converging, with non-commercial traders still dominating... sales. Recently, speculators have begun building long positions, so a shift in sentiment may occur soon, though it is unlikely to affect the GBP/USD pair.
The dollar continues to decline due to Donald Trump's policies, which is clearly visible on the weekly timeframe (illustration above). The trade war will continue in one form or another for a long time, and the Fed will certainly lower rates in the next 12 months. Demand for the dollar will decline, one way or another. According to the latest COT report (dated January 27) on the British pound, the "Non-commercial" group opened 6,500 BUY contracts and 600 SELL contracts. Thus, the net position of non-commercial traders increased by 5,900 contracts over the week.
In 2025, the pound rose significantly, but it should be understood that the reason is one: Donald Trump's policies. Once this reason is neutralized, the dollar could start to rise. However, no one knows when this will happen.
On the hourly timeframe, the GBP/USD pair continues to form an upward trend. The British pound reached last year's highs without much difficulty and is now poised to rise further. But first, it decided to correct. The fundamental and macroeconomic backdrop fully supports such a development, and the market has been accumulating strength for a new upward move for six months.
For February 3, we highlight the following important levels: 1.3201-1.3212, 1.3307, 1.3369-1.3377, 1.3437, 1.3533-1.3548, 1.3615, 1.3671-1.3681, 1.3751-1.3763, 1.3846-1.3886, 1.3948. The Senkou Span B (1.3605) and Kijun-sen (1.3760) lines can also be sources of signals. It is recommended to set the Stop Loss to breakeven when the price moves in the correct direction by 20 pips. The Ichimoku indicator lines may shift throughout the day, which should be taken into account when determining trading signals.
On Tuesday, there are no interesting events scheduled in the UK, while the US will have the JOLTs report on job openings, which is not significant. Most likely, trading today will also proceed based on technical factors.
Today, traders may consider short positions with targets of 1.3605-1.3615 if the price rebounds from the area of 1.3671-1.3681. Long positions will become relevant with targets of 1.3751-1.3763 if the price consolidates above 1.3671-1.3681.
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