GBP/USD – 1H
Hello, dear traders! On the H1 chart, GBP/USD reversed and headed to the 23.6% retracement level of 1.3884. However, the quote failed to reverse from this level. At the moment, there are no sell signals. Overall, GBP/USD is currently moving in a descending corridor, that is, the greenback keeps strengthening. On the H4 chart, the US dollar's growth is seen as a correction preceding a stronger pound sterling. There are now almost no factors contributing to the strengthening of the greenback. The coronavirus situation in the US seems to be out of control these days with the number of new cases keeping increasing. Moreover, the Fed has not hinted at the possibility of early tapering yet. If the pandemic will continue tightening its grip on the country, the regulator will hardly resort to action soon. At the same time, inflation remains rather high. Therefore, the pound sterling currently has a better chance of rising.
Moreover, the flow of negative news from the UK has stopped. Earlier, the country was in the midst of unsuccessful negotiations with the EU. There were constant disagreements and a lack of mutual understanding about the Northern Ireland Protocol. Currently, nothing of the sort is weighing on the country. In the UK, unlike the US, the Covid-19 wave is already slowing. The number of newly registered cases decreased almost two times from its peak levels. Some 75% of the population have already received 2 vaccine shots in the UK. Meanwhile, in the US, only 50% have been vaccinated. At the same time, it remains unknown whether vaccination will help stop the spread of the virus. Medical workers suggest that it will not. They project that the virus will last for years. Mass vaccination can only slow down its spread and reduce hospital admissions, complications, and deaths. However, it will not help stop the coronavirus and block its transmission from person to person.
GBP/USD – 4H
On the H4 chart, GBP/USD returned to the 23.6% retracement level of 1.3870, reversed, and started moving down to 1.3790. At the same time, if the quote closes above the 23.6% retracement level, the pair is likely to rise to 50.0% and 61.8% retracement levels of 1.3908 and 1.3989 respectively. None of the indicators shows any divergence possibility.
US and UK macroeconomic calendar:
On Monday, the macroeconomic calendar both in the UK and the US will be empty. Tomorrow, important reports are set for release. They are UK inflation and US retail sales.
Commitments of Traders (COT) report:
The latest COT report as of August 10 logged a change in market sentiment to bullish. In fact, bullish sentiment is increasing. Some 1,872 long and 5,480 short positions were closed in the previous week. Thus, the number of long positions held by large market players exceeds short ones, and the gap between them is widening. A change in Non-commercial traders' sentiment indicates that large players are not prepared to continue the sell-off of the pound sterling. Demand for the British currency has once again increased among speculators. At the same time, bulls are not strong enough since the Non-commercial group of traders has only 6,000 long positions more than short ones.
Outlook for GBP/USD:
Traders should consider opening long positions if the price closes above 1.3870 on the H4 chart with the target set at 1.3981. Short positions should be considered in case of a reversal from 1.3870 on the H4 chart with targets seen at 1.3830 and 1.3776.
TERMS:
Non-commercials are large market players: banks, hedge funds, investment funds, private, large investors.
Commercial are commercial enterprises, firms, banks, corporations, companies that buy currency not to obtain speculative profit, but to ensure current activities or export-import operations.
Non-reportable positions are small traders who do not have a significant impact on the price.