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The GBP/USD currency pair also traded higher on Monday, driven by new trade tariffs that Donald Trump imposed on some EU countries—particularly those vigorously supporting keeping Greenland as part of Denmark. Recall that Trump repeatedly stated last year his desire to take the world's largest island for himself, and in 2026, he intensified his rhetoric. According to Trump, Denmark must sell the island, or America will take it by force. Of course, nobody is going to give Greenland to Trump voluntarily, and the EU is already preparing a retaliatory package of tariffs and sanctions. Thus, anyone who thought the trade war between the EU and the US ended in 2025 is very mistaken.
The new trade war promises only further losses for the dollar. Despite strong US GDP growth over the past two quarters, traders can see how the American economy actually feels, not just on paper. The labor market has been in recession since around the 25th year, unemployment is rising, business activity is weak, NonFarm Payrolls regularly disappoint, and the Fed is forced to cut the key rate. It cannot be said that the US economy is in complete decline, but the downturn is clearly visible. Keep in mind that high GDP figures are driven not by the real sector but by tariff revenues and government spending.
On the 5-minute TF, a buy signal was formed yesterday, but unfortunately, it occurred at night. Price broke the 1.3369–1.3377 area and during the day reached and surpassed the Kijun-sen line. However, the distance between them was only 40 pips, so there is still no talk of a strong move. On the hourly TF, the trendline remains relevant, so the downtrend persists.
COT reports for the pound show that commercial traders' sentiment has changed repeatedly in recent years. The red and blue lines, reflecting net positions of commercial and non-commercial traders, constantly cross and are usually close to zero. At present, the lines are moving closer together, and non-commercial traders dominate with... short positions. Lately, speculators have begun increasing long positions, so a change in sentiment is possible soon, which does not strongly affect GBP/USD.
The dollar continues to decline due to Donald Trump's policies, as shown clearly in the weekly TF (illustration above). The trade war will continue in one form or another for a long time, and the Fed will, in any case, lower rates within the next 12 months. Demand for the dollar will fall. According to the latest COT report (dated January 13) for the pound, the "Non-commercial" group opened 2,500 BUY contracts and closed 2,700 SELL contracts. Accordingly, the net position of non-commercial traders increased by 5,200 contracts over the week.
In 2025, the pound rose strongly, but it should be understood that the reason was Donald Trump's policy. Once that driver is neutralized, the dollar may resume strength, but when that will happen—nobody knows.
On the hourly timeframe, GBP/USD continues to form a downtrend. However, the duration of the pound's decline depends entirely on the duration of the euro's decline. We believe that sterling's medium-term rise will continue regardless of the local macro and fundamental backdrop. However, the market is currently in a very strange state, as if it does not know what to do next or how to interpret the flood of incoming information.
For January 20, we highlight the following key levels: 1.3042–1.3050, 1.3096–1.3115, 1.3201–1.3212, 1.3307, 1.3369–1.3377, 1.3437, 1.3533–1.3548, 1.3615, 1.3681, 1.3763. The Senkou Span B (1.3478) and Kijun-sen (1.3417) lines can also be sources of signals. It is recommended to move the stop loss to breakeven after the price moves 20 pips in the favorable direction. Ichimoku lines may shift during the day; account for that when determining trading signals.
On Tuesday, the UK will publish the unemployment rate, change in unemployment, and wage data. Not the most important releases, but they can trigger 30–40 pip moves. Nothing interesting is expected in the US today.
Today, traders may consider new short positions targeting 1.3369–1.3377 if a rebound occurs from 1.3437, from the trendline, or upon consolidation below the critical line. Long positions become relevant if the price breaks the trendline with a target at the Senkou Span B line.
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