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The GBP/USD currency pair rose on Wednesday as part of a correction to the critical line, but bounced off it and rushed down again. It should be noted right away that the pair's fall from yesterday is associated with both technical and macroeconomics. The fact is that a rebound from the Kijun-sen line is a strong signal. And at the same time, the UK inflation report for July was published, which marked a new acceleration in price growth. This time up to 10.1% per annum. Previously, such a report could have provoked an increase in the British currency, as it would mean a potentially new powerful tightening of the monetary policy of the Bank of England. But now the market is not at all certain that the British central bank will be able to continue to adhere to the rate hike, which it set at the last meeting. If at the last meeting the rate was raised by 0.5%, after which inflation showed a new strong growth, then at the next meeting it is necessary to raise the rate again by at least 0.5%. Given that BoE Governor Andrew Bailey has already announced a recession, there are big doubts that the central bank will actively finish off its own economy by raising the key rate. Well, retail sales in the US showed zero growth in July and did not cause a strong market reaction.
Everything in regards to Wednesday's trading signals was quite complicated. Traders were saved by the fact that the critical line fell slightly during the day and should be considered in pair with the level of 1.2106 as an area. The price bounced off this area twice, forming two sell signals. After the first one, it managed to go down only 15 points, so at the time of the formation of the second signal, traders still had to remain in short positions. By evening, the quotes went down by 40-50 points, so the deal had to be closed manually with a profit of at least 30 points.
The latest Commitment of Traders (COT) report on the British pound has finally impressed. During the week, the non-commercial group opened 12,900 long positions and closed 9,000 short positions. Thus, the net position of non-commercial traders immediately increased by 21,900. This is quite a strong change for the pound. However, the mood of the big players still remains "pronounced bearish", which is clearly seen in the second indicator in the chart above (purple bars below zero = bearish mood). To be fair, in recent months the net position of the non-commercial group has been constantly growing, but the pound shows only a very weak tendency to increase. The growth of the net position and the growth of the pound itself are now so weak (if we talk globally), it's hard to draw a conclusion about the beginning of a new upward trend. It is rather difficult to call the current growth even a "correction". We also said that the COT reports do not take into account the demand for the dollar, which is likely to remain very high right now. Therefore, for the British currency to appreciate, the demand for it must rise faster and stronger than the demand for the dollar. And on the basis of what factors is the demand for the pound growing now? Traders have already been hard at work ignoring strong US data and a 0.75% Fed tightening in recent weeks. The pound could already go again to conquer 2-year lows.
The non-commercial group now has a total of 76,000 short positions and 42,000 long positions open. The net position will have to show growth for a long time to at least equalize these figures.
Overview of the EUR/USD pair. August 18. Eurozone GDP? Not interested! We continue to buy the dollar!
Overview of the GBP/USD pair. August 18. The market has clearly shown how it relates to inflation in the UK and the prospects of the Bank of England to overcome it.
Forecast and trading signals for EUR/USD on August 18. Detailed analysis of the movement of the pair and trading transactions.
The pair failed to settle above the level of 1.2259 on the hourly timeframe, and yesterday it failed to overcome the critical line. By the end of the day, thus, the quotes returned to the level of 1.2007 and so far everything is going to ensure that the pound's fall will continue. We highlight the following important levels on August 18: 1.1874, 1.1974, 1.2007, 1.2106, 1.2185, 1.2259, 1.2342. The Senkou Span B (1.2147) and Kijun-sen (1.2127) lines can also be signal sources. Signals can be "bounces" and "breakthroughs" of these levels and lines. It is recommended to set the Stop Loss level to breakeven when the price passes in the right direction by 20 points. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels in the chart that can be used to take profits on transactions. There are no important reports and events scheduled for Thursday in the UK and the US. Therefore, the movement may be weaker than on Wednesday. Nevertheless, the pound has adjusted sufficiently within the new downward trend to be able to continue falling against the dollar.
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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