GBP/USD 5M
The GBP/USD pair continued its strongest upward movement on Monday, May 10, which began on Friday. However, there were no questions about the upward movement on Friday. The reports on unemployment and Nonfarm in the US were indeed weak, so the dollar sell-off did not cause any surprise. However, Monday's upward movement raised a lot of questions. The only thing such a strong reaction could follow was the results of the parliamentary elections in Scotland, which brought the country closer to an independence referendum. Although, according to the logic of things, the pound should fall on this news, not rise. No, we, of course, have long been accustomed to the fact that the pound has been trading absolutely illogically over the past six months. Both the speculative factor and the factor of oversaturation of the American economy with dollars work, but if you look at the situation with the pound/dollar pair from a fundamental point of view, it becomes clear that the pound is undeservedly so high and very overbought. Although being overbought can only be said when the currency is actually being bought, and as COT reports show, for several weeks now the British currency has not been in particular demand among large players. Thus, as before, any fundamental assumptions, inconsistencies, illogical development of events should be checked and confirmed with technical signals. This is what we are going to do. Only one signal was formed on the 5-minute timeframe on Monday, and then the upward movement began. The pair crossed the extremum level of 1.4080 in the middle of the European trading session, which served as a signal to open long positions. The target was the resistance level of 1.4134, which was reached at the beginning of the US session, bringing traders a profit of about 44 points. We remind you that resistance levels do not form signals around them. Therefore, new deals around the level of 1.4134 should not have been opened. It was possible to keep the long positions open after surpassing this level, but then a correction began and it was definitely necessary to close the positions after it started.
GBP/USD 1H
On the hourly timeframe, the pound/dollar pair settled above the descending channel last Friday, which was a signal of a trend reversal, so to speak. Recall that in the last few weeks the pair was trading in the "swing" mode again and we were waiting for a new round of the downward movement. However, strong reports on Friday and completely inexplicable market reaction to the elections in Scotland on Monday led to the fact that the pound moved up 300 points. Now you need to wait for the markets to calm down a little, although the current movements could well have been worked out on the 5-minute timeframe. And at the 30-minute mark, at least two strong signals were formed when it had overcome the descending channel and the Kijun-sen line. Thus, in general, the pound/dollar pair continues to move for the most part unpredictably, so we continue to pay attention to the most important levels and lines: 1.4008, 1.4080, 1.4181 and 1.4240. Senkou Span B and Kijun-sen lines are now very far from the price. It is recommended to set the Stop Loss level at breakeven when the price passes 20 points in the right direction. On Tuesday, the only more or less important event of the day will be Bank of England Governor Andrew Bailey's speech. However, there is no guarantee that the markets will pay any attention to it, and will not continue, for example, to work out the elections in Scotland. Moreover, there is no guarantee that Bailey himself will communicate anything important to the markets.
We also recommend that you familiarize yourself with the forecast and trading signals for the EUR/USD pair.
COT report
The GBP/USD pair rose by 15 points during the last reporting week (April 27-May 3). A slight change in price, but the pair did not stand still. During the same period of time, professional traders closed 7,600 buy contracts and opened almost 2,000 sell contracts. Thus, the net position for the "non-commercial" group of traders has decreased by almost 10,000 contracts, which is a lot for the British currency. In other words, the mood of the major players has become less bullish. Now let's take a look at the chart of the movement of the pound/dollar pair and note that there is no weakening of the upward movement there. On the contrary, the movement has intensified (albeit only in recent days, which are not covered by the latest COT report). However, in any case, a strong decrease in the net position usually reflects a fall in the currency. In our case, there was no drop even in the days covered by the latest COT report. In general, the data on the COT reports are now completely different from what is happening in the market. We always say that absolutely any data that is used in trading must be confirmed by technical signals. Thus, at this time, the data from the COT reports are not confirmed. We have already discussed why this can be so. First, the COT reports for the pound clearly do not take into account the increase in supply in the US dollar market. Secondly, the COT reports are released with a delay of several days, so the pound's rise by 300 points can be reflected by the specific actions of the major players in the next report. However, in any case, based on the COT reports, no important conclusions can now be drawn for any future.
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.
