Analysis of GBP/USD 5M
On Tuesday, GBP/USD traded somewhat differently, but it had an interesting macroeconomic backdrop that could affect market sentiment. In the morning, the UK released reports on unemployment, jobless claims, and wages. Investors were treated to mixed reports, and it's impossible to assess the whole thing with just a single word (e.g., "positive" or "negative"). The market viewed wage growth and unemployment as bad for the British economy but chose to ignore unemployment claims. As a result, the pound fell, but it wasn't a significant decline, staying within reason. In general, the British pound remains close to its local lows, leans towards a correction, and maintains a bearish bias.
Only one trading signal was formed on Tuesday. At the very beginning of the European session, the price rebounded from the 1.2515-1.2520 range and then it fell by about 45 pips. It couldn't reach the nearest target level at 1.2445, and there was a reversal during the US session. Since there were no more trading signals during the day, the short position could be manually closed closer to the evening. The profit from it could have been around 20-25 pips, which at least allowed covering the losses from the euro trade.
COT report:
According to the latest report, the non-commercial group of traders closed 900 long positions and opened 9,800 short ones. Thus, the net position of non-commercial traders decreased by 10,700 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. Sell signals are starting to appear 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. We are not against the uptrend; we just believe a solid correction is needed first. 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 97,000 long positions and 48,700 short ones. I remain skeptical about the long-term growth of the pound sterling, and the market has recently started to pay more attention to selling.
Analysis of GBP/USD 1H
On the 1H chart, GBP/USD has settled below the ascending trendline, which shows that the pair may extend its downward movement. The price is also below the Ichimoku indicator lines. The pound is expected to fall, but it is gradually doing so. Fortunately, the pair has plenty of time to fall further, and the macroeconomic background will strengthen today and tomorrow.
On September 13, traders should pay attention to the following key levels: 1.2269, 1.2349, 1.2429-1.2445, 1.2520, 1.2605-1.2620, 1.2693, 1.2786, 1.2863. The Senkou Span B line (1.2594) and the Kijun-sen line (1.2495) 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 Wednesday, the UK will release reports on monthly GDP and industrial production. We believe that any reaction to these reports will be relatively weak. Instead, markets will be focused on US CPI, ready to react more strongly than the results of the Federal Reserve meeting.
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.
