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GBP/USD 24H.
The GBP/USD currency pair has grown by 100 points this week and is also trying to start a new upward trend on the 4-hour timeframe. As in the case of the euro/dollar pair, the quotes worked out the target zone within the last round of the downward correction in the global plan – 1.3600-1.3666. Thus, at this time, nothing prevents the pair from starting a new upward trend. As in the case of the euro, most of the fundamental and technical factors speak in favor of further strengthening of the pound. Even despite all the problems of the economic, political, and geopolitical nature of the UK. Recall that the money supply in the United States continues to increase and so far the Fed has not even announced a reduction in the volume of monthly injections into the American economy. Injections of at least $ 120 billion a month will continue for an unknown amount of time. Thus, we believe that the pound can safely continue its growth, even if the volatility has decreased in recent months. The same picture as for the euro. In the illustration above, all the movements look very solid. But if you zoom out to the real one, so that at least part of the previous upward movement is placed on the illustration, it immediately becomes clear that the current volatility is quite low. The entire upward trend in the pound over the past year and a half has taken 2,800 points. The downward correction against the entire trend in the last 6 months is 670 points. If the correction for the euro was a third of the movement, then for the pound – even less than 23.6% for Fibonacci. We believe that in the long term, the bears are extremely weak. Or the Fed is pouring an extremely large amount of money into its economy.
COT report.
During the last reporting week (August 24-30), the GBP/USD pair gained 35 points. The most important group of "Non-commercial" traders continues to reduce their net position, and their mood is becoming more "bearish". These changes are visible on the indicators in the illustration above. The first indicator clearly shows that the green line (the net position of the "Non-commercial" group) has already gone below the zero levels. The mood of the major players changed to "bearish" at this moment. It is also clear that in the last 6 months, the red and green lines (net positions of the "Commercial" and "Non-commercial" groups) have only moved towards each other, which means the end of the current trend (in our case, the upward one). However, we still cannot conclude that the upward trend is complete because the correction against this trend is too weak. It is the weakness of the correction over the past 6 months that does not allow us to conclude that this is the beginning of a new trend and not just a correction. Thus, the major players continue to sell the pound, and the currency itself could not even go below the target area of 1.3600-1.3666 after three attempts. Therefore, we believe that the factor of injecting hundreds of billions of dollars into the US economy by the Fed remains in the first place in terms of importance, which ensures the depreciation of the dollar over a long distance and does not allow it to strengthen too much in the short term. During the reporting week, non-profit traders closed 2,500 contracts for purchase and almost 5,000 contracts for sale. Thus, the net position has even increased slightly, but this does not change the essence of the matter. So far, the major players are "bearish", but this does not help the pound/dollar pair to continue moving below 1.3600.
During the current week, no single important report was published in the UK. Therefore, the macroeconomic background for the pair was the same as for the euro/dollar. It came down to American macroeconomic statistics, which were quite a lot this week, but at the same time, it did not provoke any strong reaction of the markets. Even on Friday, when the Nonfarm Payrolls report was published in the States, the volatility of the pound was only 70 points. And apart from the Nonfarm report, traders seem to have paid no attention to anything at all. Two ISM reports this week, the ADP report, and the unemployment report was easily and simply ignored. And these are just the most important reports that were ignored. Thus, for the time being, we are focusing on the technique that speaks in favor of continuing the growth of the pair, which is fueled by the local "foundation" (low probability of curtailing the QE program) in the near future.
Trading plan for the week of September 6-10:
1) The pound/dollar pair was fixed above the critical line last week, so the trend is currently changing to an upward one. Of course, it is still too early to say this for sure, since the Bollinger bands are still directed downwards, and the price has not yet overcome the Ichimoku cloud. Therefore, it will be possible to speak more confidently about a new hike to the north after confidently overcoming the level of 1.3910. In this case, you can buy a pair with a target of 1.4126.
2) The bears let the initiative out of their hands last week and now the pair can continue its growth. From our point of view, sales will not be relevant in the near future, since the price failed to overcome the level of 1.3600 several times. Nevertheless, this is the foreign exchange market and if the pair manages to return below the critical line, then sales can be considered again with the first target of 1.3600.
Explanations to the illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. Take Profit levels can be placed near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced earlier.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.
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