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GBP/USD 5M
The GBP/USD pair was much more interesting on Wednesday than on the first two trading days of the week. Much worse than the EUR/USD pair, though. In general, both major pairs moved similarly only in the US session, but in completely different ways during the European session. It should be noted right away that the market ignored the British business activity index (figure "1" in the chart), unlike the European one, although the indicator rose from 57.8 to 59.6 points, so one could, logically, expect the pound to rise. But that did not happen. Further, there was a blatant flat during the entire European session, and it seems that there was also a flat in the morning, which had been going on since the beginning of the week. In general, this vague movement continued until the US session, when first there was a disappointing ADP report on the US labor market (figure "2" in the chart), and then the indexes of business activity in the US services sector (numbers "3" and "4")... A rather weak market reaction followed the ADP report, but the pair fell after the ISM index was released, which indicates the dollar's appreciation. We have said in other articles that it was quite unexpected to see such a strong market reaction to the ISM report, given that more important reports had previously been ignored. Moreover, the ISM index was also at a very high value before the rise in July. Therefore, it is not clear what exactly excited the traders. Now let's start studying trading signals, and here everything is much more complicated than for the EUR/USD pair. It is more difficult because of the flat that was in the European session. By and large, the very first two trading signals, which turned out to be false and brought a 20 point loss, broke all further trading. And for the better, because the only level that the price crossed during the day was the extreme level at 1.3932, which was exactly in the middle of the trading range on August 4. Simply put, in any case, this level was located where it was very unprofitable to see the formation of signals. In any case, no strong signals were generated. And in any case, the signals to sell during the US session should be ignored, since they were formed immediately after important US reports were published. Thus, the least amount of loss was obtained for the pound/dollar pair, which overlaps with the profit for the euro/dollar pair.
Overview of the EUR/USD pair. August 5. James Bullard: it's time to complete the anti-crisis policy and wind up QE!
Overview of the GBP/USD pair. August 5. What is the rate hike and QE curtailment? The US labor market is extremely weak!
GBP/USD 1H
The pound/dollar pair has settled below the upward trend line on the hourly timeframe, so the upward trend has temporarily reversed, and the downward correction is likely to continue. However, a rising channel was also formed yesterday, which made it possible to expect a continuation of the upward movement. However, this channel was weak and the bears managed to settle below it. In technical terms, we continue to draw your attention to the most important levels and recommend trading from them: 1.3800, 1.3886, 1.3981, 1.4000. Senkou Span B (1.3775) and Kijun-sen (1.3927) lines can also be sources of signals. It is recommended to set the Stop Loss level at breakeven when the price passes in the right direction by 20 points. The Ichimoku indicator lines can move during the day, which should be taken into account when looking for trading signals. The event of the week for the pound will take place on Thursday. The results of the Bank of England meeting will be summed up, and the markets will receive an answer whether it is worth expecting any tightening of monetary policy from the regulator in the near future or not. There will also be a speech by BoE Chairman Andrew Bailey, who can also clarify some of the issues of concern to the markets. In the States today - only a minor report on applications for unemployment benefits, which will definitely be in the shadow of a more important event in the UK.
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 200 points during the last reporting week (July 13-19). The data from the latest Commitment of Traders (COT) reports fully support this development: the net position of non-commercial traders is falling, and the pound is also dropping. Thus, everything seems to be logical. However, the first indicator in the chart clearly shows that the upward trend is not ending, but that a new downward trend is about to begin. The green and red lines crossed, which already means a bearish mood of traders. Let us remind you that the green line is the net position of the "non-commercial" group, and the red line is the net position of the "commercial" group. Consequently, at this time, professional players have already opened a larger number of contracts for selling (short) than for buying (longs). And this suggests that major players believe in the further fall of the British currency. But here the same factor also works as for the euro/dollar pair. Trillions of dollars continue to flow into the American economy, which is why its rapid recovery is achieved. However, at the same time, the money supply is growing, inflation is rising, which depreciates the dollar much faster than the sales of the major players of the pound. Consequently, we are fully justified in expecting that the pound will also start to rise in price again, simply because inflating money supply in the United States is more global. During the reporting week, major players immediately opened 11,600 contracts for sale and closed 1,100 contracts for buy. Their net position decreased immediately by 12.7 thousand. Now they already have more open sell positions than buy ones. However, on all these actions of large players, the pound barely managed to get to the last local low, which was formed even when the mood of traders was bullish.
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.
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