GBP/USD 5M
The GBP/USD pair moved very attractively on August 17. A downward movement began at the Asian trading session, which persisted throughout the entire trading day. Although it would be more correct to say that it has not ended since Monday. One way or another, the British currency continued to fall, and here the question arises: why did the British pound fall all night, all morning and all day, and the European one fell only in the afternoon? After all, all European and US reports were ignored by the markets, and the data from the UK should have provoked the pound's appreciation. Therefore, they can also be ignored. Consequently, one can pay attention and analyze only the general fundamental background, which now boils down to the crisis in Afghanistan. And that is why the euro and the pound should have been simultaneously depreciating against the US currency. At least that would be logical. However, this did not happen, and this moment raises questions. Now for the macroeconomic reports. In the UK, the unemployment rate fell to 4.7% in June, the number of applications for unemployment benefits fell by 8,000, and average wages rose slightly more than experts predicted. In general, the entire package of statistics from Great Britain turned out to be quite strong, but the pound failed to find support from the market on Tuesday.
The number "1" in the chart marks the time of the release of the UK package of reports. As you can see, at that time the British currency had already begun to fall and the British reports did not affect this in any way. Now let's go through the trading signals. Unfortunately, during the European trading session there was a period when the pair was practically flat for several hours. And it was at this time that it crossed the extremum level of 1.3800, around which four trading signals were formed at once, the first three of which turned out to be false. The first signal to sell brought a loss of 16 points, the second (and third) to buy - 15 points of loss. The fourth (just when a powerful downward movement began) was no longer recommended to work out. Traders could open new short positions only on the last, fifth sell signal - overcoming the level of 1.3754. After its formation, the price went down by about 20 points, so most of the loss on the first two deals was closed. This is how, despite the strong downward movement on the 1-hour timeframe, on the 5-minute timeframe, we received a lot of false signals.
GBP/USD 1H
The pound/dollar pair continues a fairly strong downward movement on the hourly timeframe, and has dropped by more than 100 points during the day. Quotes went much lower than the descending channel, so the trend now continues to be downward. As we said earlier, the current drop in quotes was provoked, with a high degree of probability, by the events in Afghanistan, so it is extremely difficult to predict how much more the markets will buy the dollar based on this factor alone. However, today Federal Reserve Chairman Jerome Powell's speech will still take place, which may also affect the movement of the pound/dollar pair.
In technical terms, we continue to draw the attention of traders to the most important levels and recommend trading from them: 1.3677, 1.3723, 1.3754, 1.3794, 1.3886. Senkou Span B (1.3876) and Kijun-sen (1.3806) 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. The UK will release its July inflation report on Wednesday, 18 August. This is quite an important report, however, given how the whole package of macroeconomic statistics from the UK was ignored, it may also go unnoticed by the markets. In general, it is now important to understand how long the purchases of the American currency will continue on the basis of the geopolitical crisis in Afghanistan? We believe that the dollar may rise for a few more days, ignoring all other factors. But hardly more. Recall that in the long term, the upward trend is still preserved and we are waiting for its resumption. Nevertheless, since such a situation has developed, the dollar may rise in price for some time. The US will not publish any important reports on Wednesday, and the Fed minutes in the evening will most likely be ignored.
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.
