GBP/USD 5M
The GBP/USD pair moved very weakly on August 20 and inside the horizontal channel. In principle, this can be clearly seen in the chart above. Both linear regression channels are directed sideways and almost coincide with each other. The volatility of the day was 39 points. This is not just small for the pound, it is catastrophically small. However, the movements of the pound/dollar pair have been rather ambiguous lately. We have already said that the decline by almost 250 points of the past week looks rather strange. Markets happily worked through all the reports that spoke against the pound, but ignored the reports that were for the pound. One could assume that the markets are actively buying the US currency, as they expect the Federal Reserve to wind down the QE program, however, over the same week, the dollar rose by 90 points against the euro. That is, three times less. Thus, the reasons for such a collapse in quotes, when the pair was already ready to begin the formation of a new upward trend, are absolutely incomprehensible. No trading signals were generated during Friday. The price did not even come close to any important level or line. The morning report on retail sales in the UK, which turned out to be significantly weaker than forecasts, was completely ignored by the markets. However, the upward correction did not start on Friday, which is also very strange. Thus, according to our recommendations, traders should not have opened deals on August 20, and the pound's movements are now as illogical as possible.
GBP/USD 1H
The pound/dollar pair maintains a downward trend on the hourly timeframe, as it is located below the descending channel, as well as below the lines of the Ichimoku indicator. Moreover, a second downward channel was formed, which has a sharper slope. Thus, the pound may continue to fall in the near future, although we have long awaited the formation of a new long-term upward trend. Or at least a correction after a 250-point drop. We continue to draw the attention of traders to the most important levels and recommend trading from them: 1.3564, 1.3590, 1.3677, 1.3725. Senkou Span B (1.3873) and Kijun-sen (1.3733) lines can also be signal sources. It is recommended to set the Stop Loss level at breakeven when the price passes 20 points in the right direction. The Ichimoku indicator lines can move during the day, which should be taken into account when looking for trading signals. The UK will release its August business reports in the services and manufacturing sectors on Monday, 23 August. The values of these indicators remain quite high, however, the latest reports from Great Britain were not the best, therefore, a strong decline in business activity is also possible. However, it will be quite difficult for the pound to continue falling in case of bad reports, as it has already gone down a decent distance without recoil. Thus, it is unlikely that the downward movement will continue, even if business activity disappoints. In the States, similar reports will be released in the late afternoon. We believe that with any statistics, the pair will tend to start an upward correction on Monday.
We also recommend that you familiarize yourself with the forecast and trading signals for the EUR/USD pair.
COT report
The GBP/USD pair did not lose or gain a single point during the last reporting week (August 10-16). Moreover, if you look at the chart above, you can clearly see that there is no downward trend at this time. There is a correction, and the correction ends sooner or later. According to the latest Commitment of Traders (COT) reports, the major players were not very active, but still reduced their net position (green line of the first indicator). And commercial traders, on the contrary, increased it. This suggests that the upward trend is coming to an end, but at the same time, the data of the COT reports for the pound is very inaccurate, since at the time when the pound grew by those 2,800 points, which we have already mentioned, professional traders did not always increase long positions. It was on the basis of this fact that we concluded that the factor of the Federal Reserve's infusion of trillions of dollars into the US economy has a greater influence on the British currency exchange rate, which inflates the money supply and provokes inflation. Moreover, in the last few weeks, the group of non-commercial traders has been increasing buy contracts/longs (the green line rises, the second indicator rises). Thus, the bullish sentiment among the major players is strengthening again. Consequently, the pound may start to rise in price again. Changes were minimal during the reporting week. In total, professional traders have closed 2,700 buy contracts and less than 500 sell contracts. Thus, the net position decreased by 2,500. However, such changes are insignificant for the British currency. In general, now between the purchases and sales of the pound at "non-commercial" is almost complete equilibrium.
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.