Trading Recommendations and Analysis for GBP/USD on June 23. Starmer's Resignation Revives the Pound

The GBP/USD currency pair traded in the exact opposite direction of the EUR/USD pair on Monday. This can be easily explained—yesterday, it became known that UK Prime Minister Keir Starmer decided to resign. Thus, Britain will get its seventh prime minister in the last ten years. As mentioned previously, there has not been a political crisis in Britain; it has been ongoing for ten years, and everyone has long since gotten used to it. Paradoxically, the market reacted to Starmer's resignation by buying the British pound. Therefore, many experts' theories that about a month ago, the market was desperately selling the pound due to the potential for Starmer's resignation, failed on Monday. A change of prime minister is not necessarily for the worse, and Britain has lived within this political crisis for a long time. However, the British pound has not moved far from its local lows. Therefore, the pair's rise on Monday may be short-lived.

Technically, the downward trend has resumed, as the market has been relentlessly buying dollars for two consecutive days last week. We do not find the downward movement logical or warranted. Instead, we consider it a potential trap for traders. There have been no grounds for such a strong rise in the U.S. currency. The resolution of the geopolitical conflict in the Middle East, the Bank of England's neutral stance, and a strong unemployment report from Britain—these factors should at least have stopped the decline of the British currency. Yet, they were ignored.

On the 5-minute timeframe on Monday, one good buying signal was generated. At the start of the European trading session, the price tested the 1.3179-1.3187 area and bounced off it. By the end of the day, it rose by 45-50 pips, which traders could pocket.

COT reports on the British pound show that in recent years, commercial traders' sentiment has been constantly changing. The red and blue lines, which reflect the net positions of commercial and non-commercial traders, frequently cross and are mostly close to the zero mark. Currently, the lines are diverging, and non-commercial traders continue to dominate with... sell positions. Given the events in the Middle East, it is not surprising that demand for risk currencies is low.

In the long term, the dollar continues to weaken 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 Trump's policy is aimed, both directly and indirectly, at weakening the American currency. However, geopolitical factors are currently in the spotlight, which have recently provided strong support for the dollar. Since the conflict in the Middle East cannot be considered resolved, the U.S. dollar may still show strength in the future. According to the latest COT report (as of June 9), the "Non-commercial" group closed 7,900 buy contracts and opened 4,000 sell contracts. Thus, the net position of non-commercial traders decreased by 11,900 contracts over the week.

On the hourly timeframe, the GBP/USD pair has resumed its downward trend, which does not align with the current fundamental and macroeconomic backdrop. However, for three months, the market ignored both fundamentals and macroeconomics, and now it seems to selectively ignore geopolitics while trading based on other factors. We do not believe the British pound deserved such a strong decline.

For June 23, we highlight the following important levels: 1.3096-1.3115, 1.3179-1.3187, 1.3301-1.3309, 1.3369-1.3377, 1.3465-1.3480, 1.3588, 1.3671-1.3681, 1.3751-1.3763. The Senkou Span B line (1.3393) and the Kijun-sen line (1.3303) may also serve as sources of signals. It is recommended to set the Stop Loss at breakeven once the price moves 20 pips in the correct direction. The Ichimoku indicator lines may shift throughout the day, which should be considered when determining trading signals.

On Tuesday, indices of business activity in the services and manufacturing sectors will be published in the UK and the US. The market may theoretically react to the British reports, but it largely ignored much more significant reports and events last week. Therefore, it is unlikely there will be any reaction.

Today, traders may consider short positions targeting 1.3179-1.3187 if the pair bounces from the 1.3301-1.3309 area. Long positions remain relevant after a bounce from the 1.3179-1.3187 area, with a target of 1.3301-1.3309.

Price levels of support and resistance (resistance/support) – thick red lines around which movements may end. They are not sources of trading signals.

Kijun-sen and Senkou Span B lines – Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour timeframe. They are strong lines.

Extreme levels – thin red lines from which the price has previously bounced. They are sources of trading signals.

Yellow lines – trend lines, trend channels, and any other technical patterns.

Indicator 1 on COT charts – the size of the net position for each category of traders.