GBP/USD 5M
The GBP/USD pair has been trading very poorly over the past day. The movements were ragged and chaotic. There was no trend, although the direction was still to the downside. Volatility was around 70 points, which is quite a bit for the pound. However, the main thing is different. Very few trading signals were generated during the day and all of them turned out to be false. Let's try to figure out how to trade the pound/dollar pair on Wednesday, May 19. First of all, it should be said that in the morning, at the European trading session, a fairly important report on inflation was published in the UK. As it turned out a little later, there was no special reaction to this report, but no one could have known about this when this report was published. The first buy signal in the form of a price rebound from the extreme level of 1.4181 was formed just when this report was released. Therefore, the long position clearly should not have been opened. The second signal – for selling – was even more vague and confusing. The pair spent about an hour near the level of 1.4181 and eventually surpassed it. Formally, it was possible to open a short position here, but the pair did not reach the nearest goal – the Kijun-sen line, so it was not possible to make money on this deal. The price fell by more than 20 points, so it was necessary to set the Stop Loss at breakeven. It was on this order that the deal was eventually closed. And so traders did not receive any loss or profit on Wednesday. Returning to the inflation report, the indicator accelerated to 1.5% in annual terms, and the main (basic) consumer price index accelerated to 1.3% y/y. Overall, the trend is good, but both measures of inflation are still well below the 2.0% target.
GBP/USD 1H
The hourly timeframe also clearly shows how the pair was trading erratically on Wednesday. Several large candles, black and white, alternated. In general, the local correction continued, but so far the price has not even been able to work out the critical line. The upward trend and direction persist, as eloquently evidenced by the upward trend line. Global factors also remain on the pound's side, so we believe that in the long term, growth will continue. It will be possible to speak about a more or less strong downward movement when the pound has overcome the rising trend line. We continue to pay attention to the most important levels and lines and trade from them: 1.4080, 1.4181 and 1.4240. The Senkou Span B (1.4001) and Kijun-sen (1.4111) lines can also be sources of signals. The Stop Loss level is recommended to be set to breakeven when the price passes in the right direction of 20 points. The lines of the Ichimoku indicator can move throughout the day, which should be taken into account when searching for trading signals. No major events scheduled for Thursday in the UK. However, even when the statistics were available, there was almost no reaction to it. Therefore, losses were small. We only have a minor report on applications for unemployment benefits that is set to be released in America, but it will also provoke at least some more or less strong movement of the pair.
We also recommend that you familiarize yourself with the forecast and trading signals for the EUR/USD pair.
COT report
The GBP/USD pair rose by 210 points during the last reporting week (May 4-10). Last Friday, traders got rid of the dollar because of the weak Nonfarm report, on Monday - by inertia. It was these two days that played the greatest role. Starting in January 2021, professional traders began to try to keep the main trend, since before that they constantly changed their strategy of working with the pound. The first indicator in the chart shows that the red and green lines began to move away from each other approximately in January, which indicates a new trend, which in our case is in fact the old trend of 2020. Nevertheless, the "non-commercial" group is currently raising its net position, increasing purchases of the pound, which look absolutely groundless from a fundamental point of view. But what if the pound is growing, and non-commercial traders are just aiming at making money from the exchange rate difference? During the reporting week, 15,000 Buy contracts and 6,000 Sell contracts were opened for the pound. Consequently, the net position increased by 9,000 contracts. The total number of open buy-positions is now 68,000, and Sell at 38,000. The difference is almost twofold, which indicates a moderate bullish mood of professional players. As in the case of the euro currency, we draw attention to the fact that at this time more global factors than the actions of large players, which usually set the direction of the trend, overlap the data of Commitment of Traders (COT) reports. However, COT reports now also speak in favor of continued growth in the British currency.
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.