GBP/USD – 1H.
Hello, traders! On the hourly chart, the quotes of the GBP/USD pair performed a consolidation over the short-term downward trend line, which slightly increased the probability of a new growth in the British dollar's quotes. However, over the past two days, the bulls failed to develop this direction. Yesterday, the Bank of England provided restrained support for its currency, without changing the key instruments of its monetary policy. And a few hours after the meeting ended, Governor Andrew Bailey made a speech, saying that "at the moment, the Central Bank does not have a specific plan for using negative rates, although they are available in the toolkit". Bailey also said that the economy will continue to recover in the near future, however, it may face serious problems if a new wave of coronavirus begins in the country. Bailey also noted that Brexit adds risks and uncertainty to the situation. The Bank of England will be ready to provide additional incentives if the situation requires it. Thus, at the moment, the Bank of England believes that the situation is relatively stable and no new intervention is required. However, in the future, it may expand the quantitative stimulus program and lower rates.
GBP/USD – 4H.
On the 4-hour chart, the GBP/USD pair returned to the corrective level of 161.8% (1.3157) and rebounded from this level again. Thus, the quotes again performed a reversal in favor of the US dollar and began the process of falling in the direction of the Fibo level of 127.2% (1.2964). The bearish divergence of the MACD indicator also worked in favor of the beginning of a fall in quotes. Closing the pair's exchange rate above the last peak of divergence will work in favor of the British currency and resume growth in the direction of the corrective level of 200.0% (1.3370).
GBP/USD-Daily.
On the daily chart, the pair's quotes performed an increase to the corrective level of 100.0% (1.3199), however, the level of 161.8% on the 4-hour chart does not allow the growth process to continue. Closing the pair's rate above the 100.0% level will work in favor of further growth in the direction of the Fibo level of 127.2% (1.3684).
GBP/USD-Weekly.
On the weekly chart, the pound/dollar pair performed an increase to the lower downtrend line. The rebound from this line may allow the pair to perform a reversal in favor of the US dollar and resume the process of falling in the direction of the lower trend line, that is, approximately to the level of 1.1500. This is a long-term perspective.
Overview of fundamentals:
On Thursday, the results of the Bank of England meeting, which I mentioned in the first paragraph and in yesterday's article, were summarized in the UK. In America, a report on applications for unemployment benefits.
The economic calendar for the US and the UK:
US - unemployment rate (12:30 GMT).
US - change in the number of people employed in the non-agricultural sector Nonfarm Payrolls (12:30 GMT).
US - change in average hourly earnings (12:30 GMT).
On August 7, traders of the British pound are advised to pay attention to the same news from the US. Nonfarm Payrolls and less important unemployment rate and changes in wages.
COT (Commitments of Traders) report:
The latest COT report on the pound was quite interesting and unexpected. It turned out that during the reporting week, the "Non-commercial" group did not increase long-contracts, but on the contrary, got rid of them, which is very strange, given the confident and strong growth of the British pound, which continued after July 28. However, the reported data shows a drop in interest among major players in the British. Moreover, the same group of traders opened 2704 short-contracts, so in general it turns out that the interest of speculators in the pound fell by about 10 thousand contracts. Given that there are only 38 thousand long and twice as many short contracts left in the hands of speculators, I can assume that a strong drop in the British dollar's quotes is possible in the near future.
Forecast for GBP/USD and recommendations to traders:
I recommend selling the pound with the goals of 1.2964 and 1.2812, as a new rebound from the level of 1.3157 was made on the 4-hour chart. I recommend buying the British currency again if the quotes close above the peak of bearish divergence with the goals of 1.3200 – 1.3250.
Terms:
"Non-commercial" - major market players: banks, hedge funds, investment funds, private, large investors.
"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy currency, not for speculative profit, but to ensure current activities or export-import operations.
"Non-reportable positions" - small traders who do not have a significant impact on the price.