GBP/USD Trading Recommendations and Trade Review for October 16 – The Pound Comes Alive

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GBP/USD 5-Minute Chart Analysis

On Wednesday, the GBP/USD pair spent most of the day in low-volatility consolidation but eventually initiated an entirely logical upward movement by evening. As previously stated, the current fundamental and macroeconomic background does not favor the U.S. dollar, and the recent period of dollar strength has appeared illogical. Both major currency pairs recently broke above their trendlines, shifting short-term sentiment to bullish. On Wednesday, neither the UK nor the U.S. released any important or even notable economic events, making the pound's rise even more telling. The fact that the market began buying GBP/USD without any accompanying news suggests that conditions are ripening for a new leg of the 2025 uptrend.

From a technical perspective, the price now needs to confidently break above the Senkou Span B line, which should not pose major difficulty. From there, the British pound could set a course toward yearly and multi-year highs—and this could happen even without fresh dollar-negative news, given the abundant factors already weighing on USD.

On the 5-minute chart, several valid trade signals formed throughout the day. During the European session, the price bounced off the 1.3369–1.3377 zone and reached the Kijun-sen line during the U.S. session. That bounce, with minimal slippage, provided a long entry opportunity. Just one hour later, the pair broke through the 1.3369–1.3377 zone. Those long positions could have been closed manually that evening in profit, or kept open with a Stop Loss moved to breakeven.

Commitments of Traders (COT) Report

Commitments of Traders (COT) reports on the British pound show that commercial traders' sentiment has fluctuated frequently in recent years. The red and blue lines—representing net positions of commercial and non-commercial traders—often cross each other and currently hover close to the zero line, indicating nearly balanced long and short positioning.

The U.S. dollar is continuing to weaken due to Donald Trump's policies. Consequently, market makers' interest in the pound is less relevant at the moment. The trade war is likely to persist in one form or another for a long time. The Fed is expected to continue cutting rates over the next year. Thus, demand for the dollar is fundamentally declining. According to the latest COT report, non-commercial traders opened 3,700 long positions and closed 900 shorts, increasing their net position by 4,600 contracts.

The British pound has risen strongly in 2025, mainly due to the impact of Trump's policy. Once that influence is removed, the dollar may rebound—but when that will happen remains unknown. Regardless of whether pound net positioning rises or falls, dollar positioning is weakening—and at a quicker pace.

GBP/USD 1-Hour Chart Analysis

On the hourly chart, the GBP/USD pair has completed its previous downtrend and initiated a fresh rally. The U.S. dollar still lacks any fundamental support for a sustained strengthening, which is why we expect the pair to retest the highs of 2025 eventually. Admittedly, the daily chart has remained rangebound in recent months, but that could change quickly. For now, the ongoing escalation of Trump's trade conflict, combined with a dovish Federal Reserve, forms a "toxic cocktail" for the dollar.

On October 16, we highlight the following important levels: 1.3125, 1.3212, 1.3307, 1.3369-1.3377, 1.3420, 1.3533-1.3548, 1.3584, 1.3681, 1.3763, 1.3833, 1.3886. The Senkou Span B (1.3402) and Kijun-sen (1.3321) lines can also be sources of signals. Place a Stop Loss at breakeven after a 20-pip favorable price move. Note that Ichimoku lines may shift throughout the day.

In the UK, GDP and industrial production data for August will be published today, though they are unlikely to carry major market weight. Quarter-on-quarter and year-on-year GDP data are typically more relevant. Moreover, the market has not been reacting strongly to production figures recently.

Trading Recommendations:

Today, traders can look to trade within the following zones:

• 1.3369–1.3377
• 1.3420
• Senkou Span B line

There are numerous key levels to work with, while high-impact events remain limited. However, the British pound has begun a new upward move, and in the short term, we expect this rally to continue.

Chart Explanations:

• Thick red lines – key support/resistance levels; potential price targets, not trade signals by themselves
• Kijun-sen and Senkou Span B – Ichimoku lines transferred from the 4-hour to the 1-hour chart; considered strong technical markers
• Thin red lines – local highs/lows that previously caused reversals; can be used for entry/exit points
• Yellow lines – trendlines, channels, and other technical formations
• Indicator 1 on COT charts – size of the net position for trader categories

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