GBP/USD 1H

The GBP/USD pair once again corrected to the 1.2636-1.2660 area on Thursday, this time without working it out. However, the quotes did not go below this area. Thus, the upward movement resumed, and the initiative remained in the hands of buyers. As a result, the pair returned to the resistance level of 1.2755 by the end of the trading day. A new price rebound from this target could trigger a new round of corrective movement. The new upward trend line was canceled very quickly, as so far traders have not been able to withdraw the pair above 1.2755 or below 1.2638. Thus, even a kind of flat was formed, which you are advised to be careful with.

GBP/USD 15M

The lower channel of the linear regression turned down on the 15-minute timeframe, signaling a possible change in the trend. However, there is no confirmation of this yet either on this chart or on the higher one. The latest Commitment of traders (COT) report showed that professional traders (the non-commercial category) continued to open Buy positions, but not as zealously as before. In total, only 2,800 contracts were opened. However, the opposing category of commercial traders (those who enter the foreign exchange market in order to purchase currency for their commercial activities) closed both Buy and Sell contracts during the same reporting week. The British currency still continued to grow in value in the period from July 15 to 21. This means that the new COT report can demonstrate a new strengthening of the bullish mood among traders. The pound began to appreciate even more after July 21, so we expect to see an increase in the net position in the next reports. If this does not happen, we will assume that large traders are preparing to change the trend of the pair to a downward one.

The fundamental background for the GBP/USD pair remains positive at the moment, but only due to the events taking place in the US, which we write about almost every day. In fact, nothing optimistic is coming from either the UK or the US. The British economy continues to contract. If America is currently facing four crises, Britain is facing three economic crises. We are talking about a crisis caused by the pandemic, a recession caused by Brexit, and a recession that is bound to happen due to the lack of trade agreements with the US and the European Union, which British Prime Minister Boris Johnson regularly talks about, but the negotiations are not moving forward. So it seems that the pound will maintain an upward mood as long as traders have enough of the negative background from overseas. As soon as traders recall that the economic situation in the UK is even worse (possible losses in 2020 are 14%, while in the United States a decline of only 5-6% is expected), this can immediately cause a serious sell-off of the British currency. On Friday, we advise traders to pay attention to reports on business activity in the UK manufacturing and services sectors, as well as changes in retail sales. Strong numbers in these reports can add confidence to buyers, and the pound/dollar pair can continue its upward movement. At the same time, similar reports on business activity in the US are unlikely to cause a strong reaction from market participants.

There are two main options for the development of events on July 24:

1) The outlook for the bulls continues to be very positive. Buyers have returned to the important level 1.2755. Thus, you are advised to continue buying the pound while aiming for levels 1.2812 and 1.2846, if traders manage to confidently overcome the current target 1.2755, from which the rebound occurred last time. Potential Take Profit in this case will amount to another 40 to 80 points.

2) Sellers are advised to start considering the possibility of opening short positions with the targets of the Senkou Span B line (1.2565) and the support level 1.2474, but for this they need to wait for the Kijun-sen line (1.2638) to be overcome. Potential Take Profit in this case is from 60 to 150 points.