03.08.202010:34 Forex Analysis & Reviews: Analysis and forecast for GBP/USD on August 3, 2020

Good day, dear traders!

Now the second summer month is over,and it is already August. Time flies, and along with it, the GBP/USD currency pair flew up at the end of July.

Let me remind you that the events of the last week in July, in my opinion, should have determined the future direction of the US currency across the entire spectrum of the market, including in a pair with the British pound. The uncertain outlook for the American economy, which the Fed directly linked to the consequences of COVID-19, the collapse of the United States GDP by 32.9% in the second quarter, and the extremely difficult situation with coronavirus in a number of several American states, could finally finish the "green". However, in my opinion, this did not happen. During the analysis of the most senior timeframes, I will try to argue my position.

Monthly

Following the results of trading last month, the pound/dollar currency pair strengthened strongly. As we can see, attempts to do this in June were doomed to failure. The barrier was a strong technical level of 1.2800. In the course of July trading, the pair not only managed to overcome this barrier, but also rose significantly higher. Taking into account the weakness of the US dollar across the entire spectrum of the market, the pound bulls took advantage of this situation and raised the quote to 1.3169. However, as a result of the rebound from the maximum values, last month closed at 1.3081, which is not bad for further upward prospects. As you can see, as a result of strong growth, the pair confidently overcame the barrier in the form of a 50 simple moving average and completed monthly trading over this moving average.

If the sterling manages to continue strengthening against the US dollar and rewrite the highs of the last month, it is possible to rise to the important psychological and technical level 1.3500, where the resistance line of the long-term downtrend 2.1161-1.7190 passes, the December highs of 2019, and the lower border of the monthly cloud is slightly higher Ichimoku indicator. However, it must be recognized that this is a rather long way, and a number of factors must coincide to implement such a scenario. This perspective should be considered medium-term, and to determine local tasks, we will switch to smaller time intervals.

Weekly

The technical picture on the weekly chart can be viewed from different angles. On the one hand, the pair confidently went up from the cloud of the Ichimoku indicator, which may indicate increased bullish sentiment for this instrument. At the same time, it should be noted that the quote faced strong resistance from sellers in the price area of 1.3145-1.3200. As you can see, there is a 200 exponential moving average, as well as a very difficult resistance zone of 1.3170-1.3200. In my opinion, only a true break of the 200 EMA (orange) and a significant mark of 1.3200 will open the way for the pair to higher prices, where the nearest reference point for bulls on the pound will be the resistance at 1.3282.

If the pair returns to the cloud at the end of the current week's trading, there will be doubts about the ability of the pound bulls to continue moving in the north direction.

Daily

Last Friday, a reversal signal appeared on the daily chart in the form of a "tombstone" candle analysis model. Especially the long upper shadow of the candle for July 31 only increases the probability of the market working out this reversal model. If this assumption turns out to be correct, I expect a decline in GBP/USD to the area of 1.2900, where the red line of the Tenkan Ichimoku indicator passes.

Bullish sentiment for the pair will not only return, but also significantly strengthen only if the growth of the "tombstone" candle is absorbed by the growth. The reversal signal will be broken if the closing price of one of the daily candles is higher than the highs of July 31 - 1.3170, and even better if the auction closes above 1.3200.

In the meantime, the main trading recommendation is sales, which will be of a corrective nature. However, I do not exclude the possibility of purchases after a decline in the price zone of 1.3030-1.3000. The opening of long positions from the designated zone will be confirmed by the appearance of bullish models of Japanese candlesticks. I assume the initial correction of the exchange rate, after which the GBP/USD can again return to the upward dynamics.

This week, there will be many fundamental events for the pound/dollar pair, the main of which will be the decision of the Bank of England on the interest rate, and, of course, Friday's reports on the US labor market. As for today, at 09:30 (London time), the UK will publish the PMI manufacturing activity index, and at 15:00 (London time), the US will present the Institute for supply management (ISM) manufacturing index to market participants.

Good luck with trading!