GBP/USD 5M
The GBP/USD pair was quite active on August 19. The downward movement began late yesterday evening, when the minutes of the last Federal Reserve meeting was published in the United States. According to many experts and analysts, this minutes has brought the central bank a little closer to raising rates (in any case, not earlier than 2023) and curtailing the quantitative incentive program (it could happen as early as 2021). Thus, this is called an increase in hawkish expectations, and for the dollar, this is called an increase in bullish sentiment. This is exactly what the dollar was doing on Thursday - it grew against the pound. Moreover, there were no important macroeconomic reports that day either in America or in Great Britain. And the European currency was correcting during the day, that is, there is a correlation between the two major currency pairs. Perhaps, few people seriously expected that the pound would collapse and lose 220 points in four days. Nevertheless, it happened, and we need to deal with the intraday movement of the pair and trading signals.
Despite the rather strong downward movement, the trading signals of today left much to be desired. Firstly, they were not accurate, and secondly, some turned out to be false. Let's start with the fact that the night movement of the pair could be worked out. Of course, not just at night, but in the morning. By the time the European trading session opened, a sell signal had already been formed in the form of consolidation below the extremum level of 1.3725. At the very opening of the European session, the price was just very close to this level, so it was possible to open short positions here. The downward movement was not strong, nevertheless, the price went down by about 40 points, overcame the levels of 1.3705 and 1.3677 on its way, and only when it consolidated back above 1.3677, it was necessary to manually close short positions and open long positions. But it was not possible to earn money on a long position, since the signal turned out to be false. Moreover, for half of the US trading session, the quotes of the pair moved exactly along the level of 1.3677, so no clear signal was formed here. The last sell signal in the form of a rebound from the level of 1.3677 from below should not have been worked out anymore, since by that time two false signals had been formed near this level. A long position should have been closed around 1.3677 at the minimum loss.
GBP/USD 1H
The pound/dollar pair maintains a downward trend on the hourly timeframe, as it is located below the descending channel, as well as below the Ichimoku indicator lines. We have already drawn the attention of traders to some illogicality of such a sharp appreciation of the dollar, but no one can take into account the logic of the market by 100% at any given moment. Now there is a situation in which there are few apparent serious reasons for the dollar's growth, but the markets are still buying it, which is why it is becoming more expensive. I wonder how long the US currency will continue to grow due to market expectations about the imminent curtailment of the QE program? We continue to draw the attention of traders to the most important levels and recommend trading from them: 1.3590, 1.3677, 1.3725, 1.3754, 1.3785 - 1.3794, 1.3886. Senkou Span B (1.3873) and Kijun-sen (1.3766) 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. Nothing interesting is scheduled in the US on Friday. However, one report will be published in the UK, which, in principle, deserves the attention of traders. We are talking about retail sales for July. According to forecasts, this indicator should decrease in growth rates compared to June. Nevertheless, everything will depend on how much the actual value does not correspond to the forecast. This is the only report of the day that the markets may react to.
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.
