GBP/USD: Trading Recommendations and Analysis for January 28. What Will the Fed Meeting Change?

[Ben Graham]

GBP/USD Analysis 5M

The GBP/USD currency pair also continued its upward movement on Tuesday. Although there were no local reasons for this, Donald Trump continues to surprise the market almost every day, causing a panic sell-off in the US dollar. Once a "safe haven," "secure currency," and "reserve currency," the dollar is falling at lightning speed, as traders and investors' confidence in Trump's policies is nearly zero. This is not just our personal opinion; the market itself responds to questions of confidence every day, week, and month. If the market believed Trump and trusted the nobility and correctness of his actions, the dollar would appreciate against its competitors rather than depreciate. However, for some reason, market participants are unable to fully appreciate the autocratic nature of the new administration.

As a result, the British pound can continue to rise against the US dollar, just as all other currencies do. Of course, at some point, the upward movement will stop, and a correction will begin. But the long-term trend is clear as day. This evening, the Fed meeting results will be announced, but no significant decisions are expected. Most likely, the central bank will keep the key rate unchanged and provide no hints about future decisions. The dollar will find it extremely difficult to count on support this evening.

On the 5-minute timeframe, traders had the opportunity to open long positions from the very start of the day. The price attempted to form a signal around the 1.3675-1.3681 area for several hours and eventually succeeded. A few hours later, the quotes rose to 1.3763 and then surpassed it. Thus, long positions can be held open until sell signals are formed.

COT Report

COT reports for the British pound show that sentiment among commercial traders has been shifting steadily in recent years. The red and blue lines, which represent 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 dominating... sales. Recently, speculators have increased their long positions, suggesting a change in sentiment may be imminent, though it does not specifically affect the GBP/USD pair.

The dollar continues to decline due to Donald Trump's policies, as shown on the weekly timeframe (illustration above). The trade war will continue in one form or another for a long time, and the Fed will reduce rates in the next 12 months regardless. Demand for the dollar will continue to fall. According to the latest COT report (dated January 20) for the British pound, the "Non-commercial" group opened 2,300 BUY contracts and closed 900 SELL contracts. Thus, the net position of non-commercial traders increased by 3,200 contracts over the week.

In 2025, the pound rose significantly, but it is essential to understand that there is a single primary reason: Trump's policy. Once this reason is neutralized, the dollar could start to rise again, but when that will happen is anyone's guess.

GBP/USD Analysis 1H

On the hourly timeframe, the GBP/USD pair continues to form an upward trend. The British pound has effortlessly reached last year's highs and is now ready to aim much higher. The fundamental and macroeconomic backdrop fully supports this scenario, as the market has been correcting for six months and accumulating strength for a new surge upward.

For January 28, we identify 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, 1.3763, 1.3833, 1.3886, 1.3948. The Senkou Span B (1.3417) and Kijun-sen (1.3594) lines may also serve as sources of signals. It is recommended to set a Stop Loss to break even if the price moves 20 pips in the correct direction. The Ichimoku indicator lines may shift throughout the day, which should be taken into account when determining trading signals.

On Wednesday, there are no significant events or reports scheduled in the UK, while the Fed meeting will occur in the US. It is impossible to predict the meeting's outcomes in advance, but the market will likely react to any results. However, these findings are unlikely to influence the upward trend of GBP/USD.

Trading Recommendations:

Today, traders can consider short positions targeting 1.3671-1.3681 if the price consolidates below 1.3763. Long positions remain relevant with targets of 1.3833 and 1.3886, as the level of 1.3763 was surpassed on Tuesday.

Explanations for the Illustrations:

• Support and resistance price levels are thick red lines around which the movement may end. They are not sources of trading signals.
• The Kijun-sen and Senkou Span B lines are Ichimoku indicator lines shifted to the hourly timeframe from the 4-hour timeframe. They are strong lines.
• Extreme levels are thin red lines from which the price previously bounced. They are sources of trading signals.
• Yellow lines represent trendlines, trend channels, and any other technical patterns.
• Indicator 1 on the COT charts shows the size of the net position for each category of traders.

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