GBP/USD 1H
The GBP/USD pair also started to adjust on Friday. However, the correction was very weak, and the upward trend line continues to signal an upward trend. At the moment, the pair has not even managed to get close to the trend line or the Kijun-sen line. Thus, it is extremely early to talk about a change in the trend. By and large, everything remains the same as it was. Buyers continue to dominate the market, and bears continue to rest. Thus, it is still not recommended to consider selling the British currency, since all technical factors indicate that the upward trend is continuing at the moment.
GBP/USD 15M
Both linear regression channels are still directed upwards on the 15-minute timeframe, so there are no prerequisites for changing the trend direction at the moment. New Commitments of Traders (COT) report on the British currency. Recall that the last COT report for July 15-21 showed that non-commercial traders opened more Sell-contracts than Buy-contracts, however, the British pound continued to grow throughout the reporting period. Friday's COT report showed roughly the same pattern. The "non-commercial" category opened 2,700 Sell-contracts and closed 8,700 Buy-contracts. Thus, the net position for this category of traders has fallen even further, which means that the bearish mood has increased. And we are thinking about the prospects of the British currency for the second consecutive week, since the most professional group of traders have not been buying the pound all this time, and the British currency is growing. We are still inclined to the option that professional traders are preparing for a serious fall in the pound, but will the fundamental background allow it to do so? On the other hand, the fundamental background is not a secret, so we believe that non-commercial traders who enter the market for the purpose of making a profit from trading know what they are doing.
The fundamental background for the GBP/USD pair also remains the same. No important messages have been received from the UK in the past week. The only positive event for the pound is the start of preliminary negotiations on free trade between Washington and London. However, it is already known that the discussion of the deal is just beginning and it is unlikely for the talks to last "a couple of months". Thus, we are still waiting for the moment when traders will remember that the situation in the UK is no less bad than in the United States. We believe that a group of non-commercial traders is already beginning to prepare for a new fall in the British pound. And we recommend that our readers also prepare for a new downward trend. But at the same time, as usual, fundamental hypotheses and assumptions need to be confirmed by technical signals, which are not yet available. The UK is set to publish the index of business activity in the manufacturing sector on Monday. However, this report, as well as a similar American one, is unlikely to cause a serious market reaction. Business activity recovered fairly quickly in all developed countries of the world, even in the United States, where the coronavirus continues to rage. At this time, these are not indicators of the state of the economy. On the other hand, business activity may start to deteriorate again in America, although this will most likely concern the service sector, not manufacturing. Thus, in the near future, we will be very interested in the meeting of the Bank of England and the report on UK GDP for the second quarter.
There are two main scenarios as of August 3:
1) Buyers are still the dominant traders in the pound/dollar market, but at the moment there is a correction. The last target was almost reached, the pair did not have enough to hit it just a few points. Thus, in the event of a rebound from the trend line or the Kijun-sen line, we recommend buying the pound again with the goal of 1.3174. All target levels will be updated today. The potential Take Profit in this case will be about 150 points.
2) Sellers are advised to start considering the possibility of opening short positions with the goal of the Senkou Span B line (1,2707) after overcoming the Kijun-sen line (1,3000) and, accordingly, the upward trend line. Sellers will have a good chance of forming a downward trend below these two barriers. The potential Take Profit in this case is about 250 points.