GBP/USD - 24H.
The GBP/USD currency pair was trading more actively this week than the EUR/USD pair. In general, we have already said that the factors that affect both main pairs are now almost the same. It explains the similarity of movements in recent months on the 24-hour timeframe. Both pairs continue to be in an upward trend, forming two rounds of correction and are now ready to resume the upward trend. The pound perfectly worked out the target area of 1.3600-1.3666, which we have repeatedly called, after which it has already managed to grow by more than 300 points. The most interesting thing is that the British currency had less fundamental reasons for such growth than the euro. On Friday, a relatively voluminous package of statistics was released for the European Union, which became stronger than forecasts. At the same time, important indicators such as GDP, unemployment, and inflation were published. However, in the UK, there was no single important event for the current week.
Moreover, there are still many problems of various kinds in the UK, which should put pressure on the pound. However, as we have repeatedly noted, the US dollar is under pressure from the Fed, which continues to stimulate the economy with hundreds of billions of dollars. Thus, we were waiting for this growth, and now it has begun. Now we expect that the pound/dollar pair will return to the level of 1.4240 (it may take several weeks) and try to overcome it again. We also believe that the last round of correction could be an "acceleration" before a new assault on the level of 1.4240.
COT report.
During the last reporting week (July 20-26), the GBP/USD pair increased by 150 points. However, the net position of professional traders continued to decline. We have already described this paradox repeatedly, and in the case of the pound, it looks more clearly and eloquently. The illustration above clearly shows that the pullbacks down in recent months were not so strong if we compare them with the entire upward trend. Nevertheless, the green line of the first indicator (the "Non-commercial" group) continues to decline. Major players continue to close buy contracts and open sell contracts. However, the pound has not fallen very much and even increased in the reporting week. Thus, we once again draw attention to the fact that the data from the COT reports are very important. It would have a more powerful impact on the pound/dollar exchange rate if it were not for the actions of the Fed, which overlap all the efforts of traders. Traders can sell off the pound, but the US dollar also depreciates if the Fed inflates the money supply every month. Therefore, it turns out that both currencies are getting cheaper. However, they cannot become cheaper than each other at the same time. Thus, the pound/dollar pair grows if the rate of depreciation of the US currency is higher than the rate of decline of the pound. From our point of view, this is what is being observed now. During the reporting week, the Non-commercial group opened 0.4 thousand buy contracts and closed 1.5 thousand sell contracts. Thus, the net position has even grown slightly. However, the total number of sell contracts for non-commercial traders is already higher than buy. Therefore, the current mood of the major players can already be called "bearish."
During the current week, there were no important publications and events in the UK. Thus, market participants could only pay attention to events in the United States. As we have already said, the Fed disappointed buyers of the US currency, but the British currency continued to rise in price even without the help of the Fed at this time. The US GDP report also allowed the British currency to move slightly up. Thus, we believe that macroeconomic statistics do not mean much to traders right now. The technical picture and fundamental global factors are more important. Even the general news background from the UK does not create any pressure on the pound. However, the news from the UK at this time is not negative.
Trading plan for the week of August 2-6:
1) The pound/dollar pair began an upward movement after working out the area of 1.3600-1.3666 and easily overcame the Kijun-sen line and even reached the Ichimoku cloud. Next week, a downward pullback is possible, after which the upward movement should resume. As we have already said, we are waiting for the pound/dollar pair near the level of 1.4240. The rebound from the Senkou Span B line has already provoked a decline in the pair, which may continue in the next few days.
2) Sellers squeezed out of the pound/dollar pair everything they could at this stage and let the initiative out of their hands. Thus, it is necessary to return to sales when a new downward trend is formed. And this is not expected in the near future. It is not recommended to work out descending pullbacks. The first sign of a possible resumption of the downward movement will be the consolidation of quotes below the critical line. In this case, the pair may fall back to the level 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.