GBP/USD 5M
The GBP/USD pair moved very weakly on Monday. However, this is not surprising at all, since the volatility in recent weeks has decreased very much for the pound/dollar pair. During the day, the pair has gone only 50 points from low to high. Moreover, there was no trend movement, there was a flat all day. Quotes were unable to break out of the 1.3838 - 1.3870 area, although there were attempts. In the article on the euro/dollar, we said that flat is a very dangerous thing for traders. And recently, it has been observed too often for major currency pairs. Traders on the pound/dollar pair can understand how unpleasant this is. Today two trading signals were generated and only by a miracle it was possible to avoid losses on them. The first buy signal was very clear and formed at the beginning of the European session. The price accurately reached the Kijun-sen line and bounced off it. However, it failed to reach the nearest target level of 1.3886, having gone up only 30 points. It is good that this was enough to place a Stop Loss order at breakeven, so when the price went back down, the long position was closed at zero. The second buy signal was much worse than the first. The price initially crossed the critical line, and here traders could even open short positions. However, this should not have been done, since by the time the signal was formed, the pair had already gone down about 40 points, which is 90% of the pair's volatility at that time. In general, it seems that the markets are waiting for some important event that will trigger a new powerful movement. Markets may be in confusion about the Federal Reserve's plans to scale back its quantitative stimulus program. However, it is worth recalling that in the UK the situation is about the same: the Bank of England has also been circling around and around the reduction of the asset purchase program for a couple of months. Thus, from our point of view, the US currency has no advantage now.
GBP/USD 1H
The pound/dollar pair continues to be within the downward channel on the hourly timeframe. Therefore, at the moment, the downward trend continues. And this is almost the only gratifying moment. At this time, traders at least understand that the trend, although weak, is still there. However, in practice, this understanding is often of no use in itself. For example, today the price bumped into the Kijun-sen line on its way and bounced off it. Therefore, the downward movement was not continued. If we take a longer term, we continue to expect the resumption of the upward trend, as in the euro/dollar pair. To do this, the quotes need to settle above the descending channel and overcome the Senkou Span B line.
In technical terms, we continue to draw the attention of traders to the most important levels and recommend trading from them: 1.3754, 1.3800, 1.3886, 1.3948. Senkou Span B (1.3892) and Kijun-sen (1.3838) lines can also be sources of signals. It is recommended to set the Stop Loss level at breakeven when the price passes 20 points in the right direction. The Ichimoku indicator lines can move during the day, which should be taken into account when looking for trading signals. There will be a lot to look out for in the UK on Tuesday, August 17. Reports on unemployment, the number of new applications for unemployment benefits, as well as changes in the average wage in the UK will be published in the morning. It is possible that there will be no reaction to this data. Markets usually do not pay too much attention to unemployment rates, preferring other indicators of the state of the economy. However, a reaction is possible, so these reports should not be overlooked. In the United States, there are reports on retail sales and industrial production. And in the evening, there will be a speech by Fed Chairman Jerome Powell. Markets will again expect him to comment on the QE program and the timing of its completion. Let us remind you that recently there have been rumors that the Fed may announce the curtailment of this program as early as September. Therefore, the attention to Powell will be huge. If this information is confirmed, the US dollar may strengthen very seriously.
We also recommend that you familiarize yourself with the forecast and trading signals for the EUR/USD pair.
COT report
The GBP/USD pair fell by 40 points during the last reporting week (August 3-9). And, if big players continue to reduce their net position in the euro, then in the pound's case, professional traders started to buy the British currency again. Pay attention to the green line of the first indicator (net position of the "non-commercial" group) - it turned up and is growing. Thus, we might be witnessing an emerging new upward trend. However, major players were not particularly zealous in opening new contracts in the reporting week. To be more precise, they only closed them. The number of Buy-contracts (longs) for non-commercial traders decreased by almost 2,000, and 5,500 Sell-contracts (shorts). However, this still means that the net position has grown by 3,500, and the mood of the most important group of traders has become more bullish. Specifically "more bullish" and not "less bearish", because at this time the non-commercial group has more buy contracts that are open than that of sell (shorts) (43.7 thousand versus 37.6 thousand). This suggests that the bullish sentiment may indeed intensify in the coming months. Moreover, the technical picture for the pound is approximately the same as for the euro: quotes dropped to the low of the first round of correction against the upward trend and were unable to continue moving down. Therefore, the probability of a new round of the upward movement is high. As you can see, both Commitment of Traders (COT) reports and technical analysis predict approximately the same scenario. Consequently, we have the right to expect a return of the pound/dollar quotes to the level of 1.4240.
Explanations for the chart:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the non-commercial group.
