Last week, the British pound showed the largest drop among other European currencies against the US dollar, which amounted to 1.70%. The main factors of such a large-scale strengthening of the US currency were the minutes of the Open Market Committee. It follows that the US Federal Reserve System (FRS) leaders may begin reducing stimulus measures. On the other hand, against the background of the situation in Afghanistan and fears related to the COVID-19 pandemic, the US dollar was in high demand as a safe asset. In general, the last five-day period for the US dollar was a success, which cannot be said about the British pound. Let's look at the charts and analyze the technical picture.
Weekly
And yet, no matter what anyone thinks, the Tenkan and Kijun lines of the Ichimoku indicator play an important role in the price movement of a particular trading instrument. After the selected candle with a very long lower shadow, it is quite logical from a technical point of view. Growth followed, which was limited by the lines of the Ichimoku indicator mentioned above. Further attempts to implement the ascending scenario ended with the formation of two Doji candles, which demonstrated the inability of the pair to strengthen further. And after that, at the auction of the last five days, the GBP/USD currency pair collapsed. I want to emphasize that from the point of view of technical analysis, everything that happened is quite logical. The fall and closing of trading on August 16-20 ended at 1.3620, slightly below the 50 simple moving average, which could support the pair and provoke an upward rebound.
However, until the end, such a course of events cannot be completely excluded yet. At the auction of the starting five-day period, the pair came close to the upper border of the Ichimoku cloud, which can also support the quote. It is what is observed at the moment of writing. The pound is slightly strengthening against its main opponent. If the week ends for the pair within the cloud, and even more so, in the event of a breakdown of the key support level at 1.3570, the downward scenario will develop because the pressure on the pair will significantly increase. To correct the situation, the bulls for the pound need to pass up the red Tenkan line and close weekly trading above the landmark technical level of 1.3800. In my opinion, such a trading course is unlikely, and the main scenario looks like a downward one.
Daily
It could be assumed that near the important technical level of 1.3600, the pair will find support and begin a recovery, which can still be characterized as corrective. At the time of completion of the article, it is what is happening. On the last day of the last weekly trading, the pound/dollar reached 1.3600, and there was a rebound from this level. Considering the breakdown of the red Tenkan line and the orange 200 exponential moving average, we can assume that a pullback will be given to the broken instruments, especially since another important level of 1.3700 passes there. Based on this probability, I suggest waiting for the course correction to the area of 1.3700-1.3740. When there are bearish reversal patterns of candle analysis on this or smaller timeframes, plan to sell the pair with the nearest goals in the area of 1.3660-1.3620. By the way, smaller time intervals will be considered in tomorrow's article on GBP/USD, after which today's trading recommendation will be adjusted, if necessary.