GBP/USD 5M
The GBP/USD pair moved very chaotic and without a definite direction of movement on Tuesday. Both linear regression channels are directed sideways, and the volatility of the previous day was about 50 points. On the one hand, this is not surprising, since not a single macroeconomic report was published yesterday. Nothing interesting happened at all during the day. On the other hand, the markets have recently very often ignored macroeconomic reports, and it is very difficult to understand on the basis of which trade decisions are made. Thus, the movement on Tuesday was openly sideways, which resulted in forming scattered trading signals, most of which turned out to be false. Let's try to deal with them. The first buy signal was formed at the very beginning of the European session. The price crossed the 1.3725 extremum level and managed to go up another 15 points, after which it returned to the 1.3725 level and settled below it. Therefore, a long position did not bring profit to traders and did not close by Stop Loss at breakeven. A loss of 15 points was received on it. A sell signal near the 1.3725 level could be worked out, but it also prevented traders from making money. However, here at least the price went down 20 points, which was enough to set Stop Loss to breakeven. Subsequently, the price also crossed the Kijun-sen line, and then turned upward and returned to the level of 1.3725, where the short position was closed at breakeven. However, it turns out that already two trading signals from the level of 1.3725 turned out to be false. Therefore, all subsequent signals from this level should be ignored. The same applies to the critical line: further signals from it should be ignored. As you can see, it was absolutely the right decision and the day was completed with minimal loss.
Overview of the EUR/USD pair. 25 August. The Fed got scared of the coronavirus and changed their minds to wind up QE
Overview of the GBP/USD pair. 25 August. The dollar retreated, but Jerome Powell could restore market confidence in the Fed's willingness to roll back QE
GBP/USD 1H
The pound/dollar pair has settled above the downward trend channel on the hourly timeframe, but could not continue to move up on Tuesday. The price has reached the Senkou Span B line twice, but this is the price level to which the line has not yet reached. However, we only take values when this line is horizontal on the 4-hour timeframe. Thus, in order for quotes to grow further it is necessary to overcome the Senkou Span B line. It should also be noted that the pair worked out on Tuesday and could not overcome the Kijun-sen line. Accordingly, downward correction requires breaking of this line. We continue to draw the attention of traders to the most important levels and recommend trading from them: 1.3601, 1.3677, 1.3725, 1.3785 - 1.3794. Senkou Span B (1.3745) and Kijun-sen (1.3693) lines can also be sources of signals. It is recommended to set the Stop Loss level at breakeven when the price passes in the right direction by 20 points. The Ichimoku indicator lines can move during the day, which should be taken into account when looking for trading signals. On Wednesday, August 25, the only report of the day will be US durable goods orders. We believe that this report is highly likely to be ignored by the markets. No important information is expected from the UK that could affect the course of trading in the pound/dollar pair.
We also recommend that you familiarize yourself with the forecast and trading signals for the EUR/USD pair.
COT report
The GBP/USD pair did not lose or gain a single point during the last reporting week (August 10-16). Moreover, if you look at the chart above, you can clearly see that there is no downward trend at this time. There is a correction, and the correction ends sooner or later. According to the latest Commitment of Traders (COT) reports, the major players were not very active, but still reduced their net position (green line of the first indicator). And commercial traders, on the contrary, increased it. This suggests that the upward trend is coming to an end, but at the same time, the data of the COT reports for the pound is very inaccurate, since at the time when the pound grew by those 2,800 points, which we have already mentioned, professional traders did not always increase long positions. It was on the basis of this fact that we concluded that the factor of the Federal Reserve's infusion of trillions of dollars into the US economy has a greater influence on the British currency exchange rate, which inflates the money supply and provokes inflation. Moreover, in the last few weeks, the group of non-commercial traders has been increasing buy contracts/longs (the green line rises, the second indicator rises). Thus, the bullish sentiment among the major players is strengthening again. Consequently, the pound may start to rise in price again. Changes were minimal during the reporting week. In total, professional traders have closed 2,700 buy contracts and less than 500 sell contracts. Thus, the net position decreased by 2,500. However, such changes are insignificant for the British currency. In general, now between the purchases and sales of the pound at "non-commercial" is almost complete equilibrium.
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.
