GBP/USD 1H

The GBP/USD currency pair, unlike EUR/USD, started a much weaker correction inside its ascending channel. In the British currency's case, there are no special prerequisites for statements about the end of the upward trend in the short term. The quotes are located near the lower border of the channel and the critical Kijun-sen line. The bulls gave up on reaching the resistance area of 1.2668–1.2688. However, this does not mean that the pair's movement vector has changed to going up. In general, the US dollar continues to remain under pressure from market participants and, even if the pound sterling is quite confidently growing in price, this does not mean that America is doing well. You see, at the same time, Great Britain is not doing so well. The British pound does not have a long-term fundamental support that would allow it to expect a stronger growth. Therefore, for the time being, we can expect that there will be a rebound from the lower border of the channel with the resumption of upward movement.

GBP/USD 15M

Both linear regression channels continue to be directed upwards on the 15-minute timeframe, so the overall trend remains upward in the short term. The latest COT report for the British pound was not as categorical as it was for the euro. Professional traders opened both Long and Short contracts during the reporting week (June 24-30). However, there were so much more for the latter, almost 4,500. Given the fact that the total number of open positions for sale in the Non-commercial category is 56,000, and the net position is currently -20958, then 4,500 is quite a lot. However, for the period after June 30, the British pound only continued to grow in price, ignoring the COT report. Thus, there are two possible options. Either professional market participants in the time period of July 1–9 sharply changed their mindset and began to open contracts to buy the pound, or a serious and prolonged fall in the British currency is brewing. In any case, we do not recommend opening positions in any direction without confirmation by technical signals.

The fundamental background for the GBP/USD pair on Thursday, we can say, was on the side of the US currency. At least this is what market participants concluded. There has been no news from the UK for several days. Meanwhile, US Treasury Secretary Steven Mnuchin made a speech yesterday, who announced that the US Congress may adopt a new project to help the economy in the near future. Mnuchin believes that this could happen before the end of July. However, Mnuchin also said that payments to Americans will not be as generous as previously planned, as this deters people from looking for work. On the one hand, this is good news for the American economy. On the other hand, nothing has been decided yet. Market participants reacted, if not to rumors, then to promises. The aid package may not be passed by Congress and in any case means that the current state of the US economy is deplorable. This is not surprising, since all countries of the world have been seriously affected by the epidemic, quarantine and the coronavirus crisis. However, the epidemic persists in the United States and this should be the number one topic for the dollar. Thus, we believe that the dollar is unlikely to receive long-term support.

There are two main scenarios as of July 10:

1) The prospects for upward movement are preserved thanks to the ascending channel. A small correction that took place could be completed today. The price rebound from the lower border of the channel or the Kijun-sen line will be a signal to open new purchases with the goals of the resistance area of 1.2668–1.2688 and the resistance level of 1.2867. Potential Take Profit in this case will be from 70 to 270 points.

2) Sellers are advised to wait for the pair to consolidate below the ascending channel, and at the same time below the Kijun-sen line(1.2557). In this case, the downward trend will resume, and the first targets for sell orders will be the support area of 1.2403–1.2423 and the support level of 1.2311. Potential Take Profit in this case will be from 110 to 230 points.