Analysis of GBP/USD 5M
GBP/USD showed similar movements to the EUR/USD pair on Thursday. The only difference is that the pound sterling has been trading in a sideways channel for three weeks, and last night it finally left this area, consolidating below the 1.2605-1.2620 area. As a result, the chances of restoring the downtrend has increased sharply, which is in line with our expectations. The pound remains overbought and unjustifiably pricey. The market has been buying it for a long time for unknown reasons, and sometimes they buy it for no reason. Now is the time to restore balance, so we fully support the downward movement. The dollar's growth was not prompted by the macroeconomic background. In fact, the US reports caused the dollar to fall. These reports fueled the decline, but for the rest of the day, the market was selling the pair, which was a good thing.
Trading signals were scarce on Thursday, and they were very much like the signals for the euro. Initially, there was a rebound from the Senkou Span B line, but this signal turned out to be false, resulting in a loss of about 40 pips. A sell signal was then formed when the price overcame the Senkou Span B, Kijun-sen, and the 1.2693 level. Subsequently, the pair dropped to the 1.2605-1.2620 area, where it was advisable to lock in profits from the trade. The profit stood at about 70 pips, which made it a profitable day. The pair did not even stop falling in the mentioned area; it continued throughout the Asian session.
COT report:
According to the latest report, the non-commercial group of traders opened 7,300 long positions and 3,300 short ones. Thus, the net position of non-commercial traders increased by 4,000 positions in a week. The net position has been steadily growing over the past 11 months as well as the pound sterling. Now, the net position has advanced markedly. This is why the pair will hardly maintain its bullish momentum. I believe that a long and protracted downward movement should begin. COT reports signal a slight growth of the British currency but it will not be able to rise in the long term. There are no drivers for opening new long positions. Slowly, sell signals are emerging on the 4-hour and 24-hour charts.
The British currency has already grown by a total of 2,800 pips, from its absolute lows reached last year, which is a significant increase. Without a downward correction, the continuation of the uptrend will be illogical. However, there has been no logic in the pair's movements for quite some time. The market perceives the fundamental background one-sidedly, ignoring any data in favor of the dollar. The Non-commercial group of traders has a total of 90,500 long positions and 39,500 short ones. I remain skeptical about the long-term growth of the pound sterling, and the market has recently begun to pay attention to short positions.
Analysis of GBP/USD 1H
On the 1H chart, the pound/dollar pair has finally left the sideways channel. Now, it can continue to fall, which is what we are actually waiting for. The macroeconomic and fundamental background is not so important right now, as the market has long since priced in all the bullish factors for the British pound. Today, Federal Reserve Chair Jerome Powell can disappoint the market, but even this event should not change traders' bullish sentiment.
On August 25, traders should pay attention to the following key levels: 1.2429-1.2445, 1.2520, 1.2605-1.2620, 1.2693, 1.2786, 1.2863, 1.2981-1.2987. The Senkou Span B lines (1.2714) and Kijun-sen (1.2680) lines can also be sources of signals, e.g. rebounds and breakout of these levels and lines. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 20 pips. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits.
On Friday, there's nothing particularly noteworthy slated in the UK, while in the US, we're expecting Powell's speech at the Jackson Hole symposium. Naturally, Powell can either support the dollar or disappoint it. Therefore, the reaction can be anything - as no one currently knows what exactly the Fed chair will say.
Description of the chart:
Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;
Yellow lines are trend lines, trend channels, and any other technical patterns;
Indicator 1 on the COT charts is the net position size for each category of traders;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.
