Analysis of GBP/USD 5M
The GBP/USD pair also calmly sustained its rise on Monday despite once again having no objective justification. From a technical standpoint, everything looks smooth. There is an ascending trend line and a clear trend with minimal corrections, indicating the strength of buyers. Therefore, expecting a bearish reversal and trying to catch it seems pointless. At the same time, throughout 2024, we have been writing that the pound's rise is often illogical. Yesterday was a vivid example of this. There were no grounds for new growth. The pair could and should have corrected downwards, but what kind of correction can there be when it is being bought relentlessly?
Of course, explaining the new fall of the dollar is easy once it has happened. Yesterday, Neel Kashkari mentioned that he was ready to consider the possibility of a rate cut in September, which could have become a new reason for dollar sales. However, Kashkari did not say that the Federal Reserve had already decided or that there were no other options. In one form or another, we have been receiving such messages for about three weeks. The dollar has once again preemptively reacted to a potential Fed rate cut. And it has been doing so since the beginning of the year. This creates a paradoxical situation – the Fed has not cut rates yet, and they remain higher than those of the European Central Bank and the Bank of England, but the dollar is falling.
Only one trading signal was formed on Monday, but it was not advisable to act on it. It emerged quite late, and the market is currently experiencing a distinct absence of bearish trading. The price attempted to rebound from the 1.2981-1.2987 area but failed. The bears are simply absent in the market. It is difficult to predict how long this new rise of the British currency will continue, as there are no new reasons to sell the dollar. It remains only to trade based on "pure technicals" between levels.
COT report:
COT reports for the British pound indicate that the sentiment among commercial traders has been constantly changing in recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, constantly intersect and are often close to the zero mark. According to the latest report on the British pound, the non-commercial group closed 23,500 buy contracts and opened 3,100 short ones. As a result, the net position of non-commercial traders decreased by another 26,600 contracts over the week and continues to fall rapidly. Yet the pound continues to rise calmly.
The fundamental background still does not provide any grounds for long-term purchases of the pound sterling, and the currency has a real chance to resume the global downward trend. However, an ascending trend line formed in the weekly time frame. Therefore, a long-term decline in the pound is unlikely unless the price breaches this trend line. Despite almost everything, the pound continues to rise. Even when COT reports show that major players are selling the pound, it continues to rise. The parade of paradoxes continues.
Analysis of GBP/USD 1H
In the hourly chart, GBP/USD has a real chance of continuing to rise. A decline is the only logical and predictable scenario in the medium term when considering all factors: technical, fundamental, and macroeconomic. However, the market continues to use any excuse solely for new purchases. Any report, even a minor one, is interpreted in favor of the pound, leaving the dollar with no chances at the moment. The issue is not macroeconomics anymore but the market's unwillingness to buy the dollar.
For August 20, we highlight the following important levels: 1.2429-1.2445, 1.2516, 1.2605-1.2620, 1.2691-1.2701, 1.2796-1.2816, 1.2863, 1.2981-1.2987, 1.3050, 1.3119. The Senkou Span B (1.2767) and Kijun-sen (1.2897) lines can also serve as sources of signals. Setting the Stop Loss to break even when the price moves in the intended direction by 20 pips is recommended. The Ichimoku indicator lines may shift during the day, which should be considered when determining trading signals.
No major events are scheduled in the UK or the US on Tuesday, so traders will have nothing to react to during the day. However, Monday has already shown that the market is ready to continue buying the British currency. Volatility is unlikely to be strong today, but overcoming the 1.2981-1.2987 range will allow the pound to aim for the 1.3050 level.
Explanation of illustrations:
Support and resistance levels: Thick red lines near which the trend may end.
Kijun-sen and Senkou Span B lines: These Ichimoku indicator lines, transferred from the 4-hour timeframe to the hourly chart, are strong lines.
Extreme levels: Thin red lines from which the price previously bounced. These provide trading signals.
Yellow lines: Trend lines, trend channels, and other technical patterns.
Indicator 1 on COT charts: The net position size for each category of traders.
