GBP/USD 5M
The GBP/USD pair was trading in different directions yesterday. The price changed the direction of movement three times during the day. Moreover, some reversals almost perfectly coincided with the time of publication of important data or other fundamental events. In general, the US dollar continues to rise in price, but again it does so very slowly and in an uncertain manner. We remind you that there are no particular fundamental reasons for the dollar's strong growth at the moment. A more global technical factor is at work, which allows quotes to fall to 1.3600-1.3666. Let's now take a look at the 5 minute timeframe and figure out how you should have traded yesterday. We can immediately say that three trading signals were formed on Thursday, all three turned out to be false, and there were at least five events that could affect or ultimately affect the movement of the pound/dollar pair. It all started early in the morning when Bank of England Governor Andrew Bailey was giving a speech. The head of the BoE did not say anything extraordinary, but noted that it is not necessary to pay too much attention to inflation in Great Britain and its sharp rise now, since this is a temporary phenomenon. Perhaps this was a response to Andy Haldane's statement a day earlier, who said that inflation in the UK could rise well above the 3% that the BoE is now talking about. Bailey also said that the central bank is ready to apply all monetary policy instruments available to him if inflation continues to accelerate at a faster pace than expected. These words provoked a sell-off in the British pound, and the first trading signal was formed during Bailey's speech, so it should not have been worked out. Then the index of business activity in the manufacturing sector in the UK was published, which only slightly decreased compared to last month, and after another half hour, Bailey's second speech began. The next trading signal to buy was formed almost at the opening of the US session. It could be worked out, since at that time important data was not published in America. However, the price could not go up by 15 points, and when the signal was being processed, a report on applications for unemployment benefits in the US was published. Not the most important report now, so it was possible to leave the deal open. But at the time when the ISM report in the United States was published, it was necessary to manually close the deal, since this index is considered important. After it, a rather strong downward movement began, although the index itself turned out to be worse than forecasted. Thus, the open deal was closed at approximately zero, and the last trading signal should not have been worked out, since it was formed exactly at the time of the publication of the ISM index.
Overview of the EUR/USD pair. July 2. Inflation, unemployment and business activity in the European Union are not of interest to traders.
Overview of the GBP/USD pair. July 2. Andrew Bailey reassures the markets about inflation, Andy Haldane disagrees.
GBP/USD 1H
The downward trend for the pound dollar is still present on the hourly timeframe, which is now supported by the trend line. This line is much easier to trade with. Overall, the US dollar continues to rise in line with our expectations and forecasts. Thus, the general state of affairs does not change. Until the price settles above the trend line, in any case, the downward trend continues. In technical terms, we continue to draw your attention to the most important levels and recommend trading from them: 1.3677, 1.3800, 1.3859, 1.4000. Senkou Span B (1.3958) and Kijun-sen (1.3849) lines can also be sources of signals. It is recommended to set the Stop Loss level at breakeven when the price passes 20 points in the right direction. The Ichimoku indicator lines can move during the day, which should be taken into account when looking for trading signals. The macroeconomic calendar is empty for the UK on Friday, and at least one major report (Nonfarm Payrolls) will be published in America, as well as two accompanying it. They will be released at the same time, so we are preparing for a strong movement at the US session.
We also recommend that you familiarize yourself with the forecast and trading signals for the EUR/USD pair.
COT report
The GBP/USD pair fell by 180 points during the last reporting week (June 15-21). We have already said in previous articles that it is necessary to wait for this new Commitment of Traders (COT) report, which reflects the behavior of market participants for the period June 16-18, when the markets showed strong volatility due to the summing up of the Fed meeting. And from the latest COT report, you can really draw some conclusions. A group of non-commercial traders closed about 7,000 buy contracts (longs) and opened 10,000 sell contracts (shorts) during the reporting week. Thus, the net position decreased by 17,000 contracts at once. Considering that at the moment there are about 100 thousand contracts open by major players, 17,000 is a lot and shows serious changes in the mood, which has become much less bullish. Nevertheless, it still remains bullish, as the total number of open buy contracts from the non-commercial group remains 1.5 times greater than the number of sell contracts. However, the difference is not as strong as in the case of the European currency. On the other hand, professional pound traders did not buy the currency at breakneck speed in the last year. This is clearly seen in both indicators in the chart. The first indicator shows that the net position of non-commercial traders (green line) rose to only 40,000, and during the penultimate, strong upward movement, it did not increase very much. The second indicator also clearly shows that large players did not build up their buy positions en masse. It was on the basis of these data that we concluded that global fundamental factors are in the first place, for example, the injection of trillions of dollars into the American economy, which led to the fall of the dollar and, accordingly, the growth of the British currency.
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.
