Analysis of GBP/USD 5M
On Thursday, the GBP/USD pair initially showed some bullish bias and then it bounced downwards strongly. The market was waiting for the upcoming US inflation report, clearly factoring in its own interpretation of this data. When it was finally released, massive purchases of the USD began. These purchases were justified, as inflation in the United States rose to 3.2%, and the core inflation only decreased by 0.1% in annual terms. Thus, the Federal Reserve might decide on at least one more increase in the key interest rate, increasing the chances of the dollar's rise. The pair even managed to leave the sideways channel on the hourly chart, but the consolidation below 1.2693 is not very strong for now. Nevertheless, we insist that the pair fall, whether it's now or later on.
Yesterday, a significant number of trading signals were generated, but some of them should have been ignored. Initially, the pair crossed the Kijun-sen line, which should have been executed with a long position. By the start of the US session, the price rose by 20 pips, and the position should have been manually closed, as the market's reaction to the report was unpredictable. Then a "storm" began, and it was only worth working with the second consolidation below the 1.2762 level, as by that time the market had already calmed down a bit. Subsequently, the price went down by about 70 pips, which traders could also capitalize on.
COT report:
According to the latest report, the non-commercial group of traders closed 13,300 long positions and 3,800 short ones. Thus, the net position of non-commercial traders fell by almost 10,000 positions in a week. But in general, it is still rising. The net position has been steadily growing over the past 10 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 and not many technical signals for short positions either.
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 opened 92,100 long positions and 42,600 short ones. I remain skeptical about the long-term growth of the pound sterling but speculators continue to buy and the pair continues to rise.
Analysis of GBP/USD 1H
On the 1H chart, the pound/dollar pair continues to correct while trading within a sideways channel. As a result, the Ichimoku indicator lines are currently weak, and the price may cross them multiple times a day. The sideways channel is well-defined, ranging from 1.2693 to 1.2786. Technically, the price has left this range, but we believe that the flat movement could persist. However, we won't be disappointed if the downward movement resumes.
On August 11, traders should pay attention to the following key levels: 1.2520, 1.2598-1.2605, 1.2693, 1.2786, 1.2863, 1.2981-1.2987, 1.3050. The Senkou Span B (1.2805) and the Kijun-sen (1.2739) lines can also serve as 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.
Today, the UK will release significant reports – GDP data for the second quarter and industrial production data. If their values closely match the forecasts, there might not be any significant market reactions. The US will release two secondary reports on producer prices and consumer sentiment, which have even lower chances of provoking a market reaction.
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.
