FX.co ★ Trading Recommendations and Trade Analysis for GBP/USD on August 31. The Dollar Has Much to Prove

GBP/USD Analysis 5M

The GBP/USD currency pair also showed a fairly decent decline on Friday, which was enough to breach the trend line and the Ichimoku indicator lines. As such, the upward trend in the pound has been completed, just as the uptrend in the euro has. Therefore, further declines in the pair this week and a strengthening of the U.S. dollar can be expected based on the technical picture. However, this week, particularly in America, several important reports will be released that could easily provoke a fall in the American currency. For example, tomorrow the ISM reports for the manufacturing sector and the JOLTS report on job openings will be released. On Thursday, the ISM index for the services sector will follow. On Friday, the Nonfarm Payrolls and the unemployment rate for August will be published. Of course, Friday will again be the most important day. Last Friday, the market considered the -79,000 Nonfarm Payroll jobs for the last year quite positive, and the dollar rose. Well, we'll see what the August figure for this most critical indicator will be under the current circumstances and how the values for July and June will be revised. The U.S. labor market is sliding once again, which is unlikely to allow the Federal Reserve to tighten monetary policy, in our view.

From a technical standpoint, the British pound has begun to form a downward trend, but much will depend on U.S. labor market data, unemployment, and business activity this week. Thus, a decline in the pair can be anticipated, but one should not forget that the U.S. economy and labor market have shown rather negative values in recent months.

On the 5-minute timeframe, two sell signals were formed on Friday. First, the pair bounced from the area of 1.3574-1.3588 and then retraced from it. Thus, traders had two opportunities to open short positions. Profits could have been taken on Friday, or the trades could have been carried over to Monday, setting a stop-loss at break-even.

COT Report

COT reports for the British pound show that for several months, non-commercial traders have dominated the market with sales. The net position is negative, despite the long-term upward trend being maintained. Given the events in the Middle East, it is not surprising that demand for the dollar has been quite high in the first half of 2026. The war is formally over, but the conflict persists. Only geopolitics can support the U.S. dollar in the near term. However, until it consolidates below the trend line, we would not expect a strong decline in the pair.

In the long term, the dollar will continue to weaken 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, and Trump's policies are aimed both directly and indirectly at weakening the American currency. The long-term upward trend remains valid, as indicated by the trend line. The price has recently tested this line and rebounded from it. According to the latest COT report (dated August 25), the "Non-commercial" group opened 16,300 BUY contracts and 6,200 SELL contracts. Thus, the net position of non-commercial traders increased by 10,100 contracts during the week.

GBP/USD Analysis 1H

On the hourly timeframe, the GBP/USD pair has begun to form a new downward trend. However, in the long term, the British pound continues to look upward. We still do not see serious reasons for sustained, robust growth in the American currency, and this week, important reports from across the ocean could create numerous problems for bears. However, technically, a decline will be quite logical this week.

For August 31, we highlight the following important levels: 1.3042-1.3050, 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. The Senkou Span B line (1.3573) and Kijun-sen (1.3589) may also provide signals. It is recommended to set the stop-loss to break even when the price moves by 20 pips in the correct direction. The lines of the Ichimoku indicator may move throughout the day, which should be considered when determining trading signals.

On Monday, no significant events or publications are scheduled in the UK or the US, so volatility is likely to be low today. However, in the remaining days of the week, trader activity could be much higher, and the dollar will face several tests of strength.

Trading Recommendations:

Today, traders may consider remaining in short positions targeting 1.3465-1.3480, as two sell signals were formed in the 1.3574-1.3588 area, and the trend has shifted downward. Long positions can be opened today if there is a rebound from the area of 1.3465-1.3480, with targets in the 1.3574-1.3588 range.

Explanations for Illustrations:

Support and resistance price levels are thick red lines where movement may conclude. They are not sources of trading signals.

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

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

Yellow lines indicate trend lines, trending channels, and any other technical patterns.

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