Trading Recommendations and Trade Analysis for GBP/USD on December 17. Pound Responds More Favorably to Wages Than Non-Farms

[Ben Graham]

GBP/USD 5M Analysis

The GBP/USD pair began to rise almost from the moment the market opened on Tuesday. However, in the second half of the day, when important US unemployment and labor-market reports were published, all upward movement halted. Overall, the British pound logically responded to the macroeconomic backdrop during the European trading session, but during the US session, we saw erratic movements with constantly changing directions. The US reports cannot be definitively interpreted as negative for the US dollar, but calling them positive is quite difficult. Essentially, the unemployment report alone is sufficient to label the entire batch of reports as weak. In the first half of the day, the pound's gains were supported by the wage report, which showed stronger growth, potentially triggering a new surge in the consumer price index (CPI). In this case, the prospects for further easing of monetary policy by the Bank of England (with the meeting scheduled for Thursday) will be in question.

However, this morning, a UK inflation report is expected, and traders will learn whether inflation is rising amid wage increases. If so, the British pound can continue to move upwards, as the probability of a rate cut by the BoE on Thursday will immediately decline. If inflation continues to decrease, the pound may also fall, as the BoE will almost certainly lower the key interest rate.

On the 5-minute timeframe yesterday, only one trading signal could be executed — a morning bounce from the 1.3360-1.3377 area. During the US trading session, the market began experiencing "whipsaws," making trading quite challenging.

COT Report

The COT reports for the British pound show that, in recent years, commercial traders' sentiment has been consistently changing. The red and blue lines representing the net positions of commercial and non-commercial traders continuously intersect and are usually close to the zero mark. Currently, they are at nearly the same level, indicating an approximately equal number of buy and sell positions.

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 inevitably lower rates in the next 12 months. Demand for the dollar will fall one way or another. According to the latest COT report (from October 28) on the British pound, the "Non-commercial" group opened 7,000 BUY contracts and 10,500 SELL contracts. Thus, the net position of non-commercial traders decreased by 3,500 contracts for the week. However, these data are outdated, and there are no fresh figures.

In 2025, the pound rose significantly, but it should be noted that there is one reason for this: Trump's policies. Once this reason is neutralized, the dollar could start to rise, but when this will happen is anyone's guess. It does not matter how quickly the net position of the pound rises or falls (if it falls). The dollar is falling regardless, and usually at a higher pace.

GBP/USD 1H Analysis

On the hourly timeframe, the GBP/USD pair continues to form an upward trend. We believe that growth in the medium term will continue regardless of the local macroeconomic and fundamental backdrop, but a significant decline is possible this week. The US labor market and unemployment data have been released, but traders are still waiting for US and UK inflation data and the results of the BoE meeting.

For December 17, we highlight the following key levels: 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 (1.3308) and Kijun-sen (1.3396) may also serve as sources of signals. It is recommended to set the Stop Loss to breakeven once 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 Wednesday, an important inflation report is scheduled for release in the UK, while the US calendar is virtually empty. However, the UK inflation report could directly influence the BoE's rate decision on Thursday. Thus, the "excitement" in the currency market continues.

Trading Recommendations:

Today, traders may consider selling if the price settles below the trend line and below the area of 1.3369-1.3377, targeting 1.3307. Long positions will be relevant upon a rebound from the critical line, with targets at 1.3437 and higher.

Explanation of Illustrations:

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

The material has been provided by InstaForex Company - www.instaforex.com