Analysis of GBP/USD 5M
On Monday, GBP/USD traded almost identically to the EUR/USD pair. The same not-so-strong movements, close to a flat, during the European session. Afterwards, a sharp decline and an equally sharp rise during the US session. By the end of the day, the pound had hardly fallen in price, but it broke out of the sideways channel on the hourly chart. However, if we draw a new boundary at 1.2620, it turns out that it is still trading within the sideways channel. The price reached the critical line and might even bounce off it, which would provoke a new downward move. Therefore, we would not rush to conclusions about reviving the downtrend. In the medium term, the dollar should rise, but for now, we have a flat trend, and there will be several important reports in Britain this week, which could also support the pound sterling.
The pound's trading signals are also almost identical to the euro. First, a buy signal was formed around the 1.2693 level, but it turned out to be false and traders incurred a small loss. Then, a sell signal was formed around the same level, afterwards the price fell by almost 70 points, but did not reach the target level of 1.2589, and over the next few hours it returned back to 1.2693. Several tens of points could be earned on this trade, but traders should have manually closed the position.
COT report:
According to the latest report, the non-commercial group of traders closed 8,900 long positions and 6,300 short ones. Thus, the net position of non-commercial traders fell by almost 2,600 positions in a week. The net position has been steadily growing over the past 11 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. Slowly, sell signals are emerging on the 4-hour and 24-hour charts.
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 a total of 83,200 long positions and 36,200 short ones. I remain skeptical about the long-term growth of the pound sterling, and the market has recently begun to pay attention to short positions.
Analysis of GBP/USD 1H
On the 1H chart, the pound/dollar pair continues to correct while trading within a sideways channel. The channel has slightly expanded, so this doesn't mean that the flat has ended. The lines of the Ichimoku indicator are currently weak. This does not mean that a strong signal cannot be formed around them. It means that many signals can form around them, some of which will be false.
On August 15, traders should pay attention to the following key levels: 1.2520, 1.2605-1.2620, 1.2693, 1.2786, 1.2863, 1.2981-1.2987, 1.3050. The Senkou Span B (1.2805) and Kijun-sen (1.2715) lines can also be 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 has already published reports on unemployment, unemployment benefit claims, and wages. Their values were quite unexpected, and the pound has already edged up. However, it could still fall. We will discuss these reports in future articles. For now, the price has hit a critical line, from which it may bounce back and show a new wave of downward movement.
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.
