GBP/USD 5M

The GBP/USD currency pair continued to trade rather volatile on Wednesday. But now you won't surprise anyone with volatility, but consolidating the price below the ascending trend line is really an event! An event, because the price formed an upward trend for three weeks and bounced off this line more than once, maintaining the trend. However, exactly one day before the announcement of the results of the Bank of England meeting, the price fell below it and began to prepare for a decline. We have already said more than once that we are waiting for the pound's fall after the BoE meeting. This is supported by the fact that everyone already knows about the rate hike by 0.5% and moreover, a long time ago. Therefore, traders had enough time to work out this tightening. Of course, the BoE meeting is such an event, the reaction to the results of which is impossible to predict 100%. No one knows what other decisions the central bank will make. Nobody knows what BoE Governor Andrew Bailey will tell the markets. One thing is for sure, volatility will remain high on Thursday and may even increase even more. As before, the market's reaction to the results of the meeting can be long, at least a day, so it will be necessary to analyze the position of the pair on Friday.

With trading signals for the pound, everything is much worse than for the euro. The problem is that the pair moved only sideways during the European trading session, along the critical line and the level of 1.2185. And any flat is always bad for traders. Therefore, there were no strong signals during this period of time, but there were four false ones. Traders could work out the first two of them and get a loss. Only the last fourth signal became real, but it just shouldn't have been worked out, since the first three signals in this area turned out to be false. The last buy signal near the level of 1.2160 was, as they say, "borderline". It was formed quite late in time, so it was up to traders to work it out or not.

COT report:

The latest Commitment of Traders (COT) report again showed insignificant changes. During the week, the non-commercial group opened 2,600 long positions and closed 600 shorts. Thus, the net position of non-commercial traders increased by 3,200. But what does it matter if the mood of the big players still remains "pronounced bearish", which is clearly seen in the second indicator in the chart above? To be fair, in recent months, the net position of the non-commercial group is still growing and the pound also shows some tendency to rise. However, both the growth of the net position and the pound are now very weak (in global terms), so it is still difficult to conclude that this is the beginning of a new upward trend, and the pound will no longer fall. We also said that the COT reports do not take into account the demand for the dollar, which is likely to remain very high right now. Therefore, in order to strengthen the British currency, the demand for it should grow faster and stronger than the demand for the dollar. The non-commercial group currently has a total of 89,000 shorts open and only 34,000 longs. The net position will have to show growth for a long time to at least equalize these figures. The Bank of England could provide theoretical support to the pound, as well as the technical need to be corrected from time to time. There is nothing more for the pound to count on now.

We recommend to familiarize yourself with:

Overview of the EUR/USD pair. August 4. Nancy Pelosi's "Taiwan" adventure is over. The conflict is over before it even starts.

Overview of the GBP/USD pair. August 4. Judgment day has arrived. The pound is awaiting the official results of the Bank of England meeting.

Forecast and trading signals for EUR/USD on August 4. Detailed analysis of the movement of the pair and trading transactions.

GBP/USD 1H

The pair has overcome the trend line on the hourly timeframe, so the upward trend has been canceled. As we have already said, now we need to wait for the official results of the BoE meeting, and it will be possible to draw conclusions only on the day itself. The pound could easily resume growth if the results are more hawkish than the market is currently waiting for. We highlight the following important levels for August 4: 1.1974, 1.2033, 1.2106, 1.2185, 1.2259, 1.2342, 1.2429. Senkou Span B (1.2066) and Kijun-sen (1.2176) lines can also be sources of signals. Signals can be "rebounds" and "breakthroughs" of these levels and lines. The Stop Loss level is recommended to be set to breakeven when the price passes in the right direction by 20 points. Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. The chart also contains support and resistance levels that can be used to take profits on trades. The UK is set to publish the results of the BoE meeting and the index of business activity in the construction industry. Nothing in the US. Therefore, naturally, everyone will focus on the BoE.

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.