On Tuesday, the GBP/USD currency pair attempted to continue its upward movement but ultimately fell back down. The pound sterling struggled to surpass even the first significant resistance level on its way to recovery. Two rejections from the 1.2237–1.2255 zone led to further declines. While the euro shows some faint signs of potential growth lasting more than two days, the pound has not even demonstrated that.
There were no significant events in the UK on Tuesday. The market continues to sell the British currency aggressively, even without external triggers. Additionally, a sharp increase in UK bond yields over the past few days has sparked renewed concerns about a potential crisis in the British economy. As a result, the pound took another hit and depreciated further. In the U.S., the Producer Price Index (PPI) was released, but it did not generate much interest ahead of the critical U.S. inflation report scheduled for today. If inflation meets expectations and rises to 2.9% year-on-year, it will further diminish the likelihood of two Federal Reserve rate cuts in 2025. Under these circumstances, the U.S. dollar may continue to appreciate steadily.
The trading signals from yesterday were poor. After reassessing the levels at 1.2215 and 1.2269, the first two signals near 1.2215 proved to be false, likely leading to losses for traders. The third signal was much better, but by that point, it was no longer advisable to act on it. Unfortunately, Tuesday turned out to be an unfavorable day for trading, but such instances are inevitable in forex trading. Today, much will depend on macroeconomic data from across the Atlantic.
The latest Commitment of Traders (COT) report for the pound sterling highlights the fluctuating sentiment among commercial traders in recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, often cross each other and typically hover around the zero mark. Currently, these lines are close together, indicating a roughly equal number of long and short positions.
On the weekly timeframe, the price initially broke below the 1.3154 level and subsequently dropped further, breaching the trendline. This break suggests that the pound's decline is likely to continue in the long term.
According to the latest COT data, the non-commercial group opened 1,600 buy contracts and 100 sell contracts, resulting in a net position increase of 1,500 contracts. However, this does not indicate a positive outlook for the pound.
The fundamental backdrop does not provide any justification for long-term purchases of the pound. Instead, the currency appears to be on the verge of a renewed global downtrend. As a result, the net position may continue to decline, signaling further waning demand for the pound.
On the hourly timeframe, the GBP/USD pair continues to exhibit bearish sentiment, as the latest corrective movement has quickly come to an end. We still see no strong drivers for the pound's appreciation, aside from the technical need for occasional corrections. This pattern repeats week after week, and in the medium term, we expect further declines in the British currency.
Key levels to watch for on January 15 are as follows: 1.2052, 1.2109, 1.2237–1.2255, 1.2349, 1.2429–1.2445, 1.2511, 1.2605–1.2620, 1.2691–1.2701, 1.2796–1.2816, and 1.2863. Additionally, the Senkou Span B (1.2461) and Kijun-sen (1.2274) lines may serve as important signal points. It is recommended to set your Stop Loss to breakeven if the price moves 20 pips in your favor, providing protection against potential losses if the signal proves to be false. Please be aware that the Ichimoku indicator lines may shift throughout the day.
Both the UK and the U.S. are scheduled to release their Consumer Price Index (CPI) reports today. While the British inflation data is important, the U.S. report carries significantly more weight. We might see strong movements early in the day, but any conclusions regarding the pair's future direction should primarily rely on the outcome of the U.S. inflation report.
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