FX.co ★ Analysis of the trading week of June 6-10 for the GBP/USD pair. COT report.

Long-term perspective.

The GBP/USD currency pair has fallen by 180 points during the current week. Thus, the pair also failed to enter the Ichimoku cloud, as did its closest relative euro/dollar. The pound failed to even work out the lower boundary of the Ichimoku cloud and has already consolidated back below the critical line. Therefore, the technical picture, from our point of view, is now unambiguous. The bulls have made a sluggish attempt to start an upward correction or an upward trend, but the whole movement looks just like a pullback. Recall that during the downward trend, both the euro and the pound's upward corrections are very weak. Given that this trend is long-term, traders may get the impression that both European currencies are falling slowly and not too much, however, we would like to note that the downward movement is stable, without prolonged consolidations, and upward pullbacks are almost minimal. Isn't this a sign of a strong trend? Therefore, the euro and the pound are falling strongly against the US currency. In recent years, many have been analyzing the movements of cryptocurrencies, in particular bitcoin, and it flies from side to side very quickly. Therefore, against the background of bitcoin, the fall or growth of the euro or the pound looks faded. But for currencies, this is a strong movement. Let's go back to the pound. Last week, the drop was observed only on Friday. It was on this day that a report on American inflation was published in the States, which eventually brought the pair down. In principle, the market's reaction to the inflation that rose to 8.6% was logical. The following picture turns out: the Fed raised the rate to 1%, and inflation has been growing and growing. Consequently, the chances are greatly increased that the Fed will continue to raise the rate in the fall and winter. Remember, we said that one decline in the consumer price index cannot be considered a trend? And so it turned out. The fact that inflation slowed to 8.3% in April turned out to be a banal accident, and in May everything fell into place. Therefore, the dollar again gets an excellent opportunity to strengthen its position even more.

COT analysis.

The latest COT report on the British pound showed insignificant changes. During the week, the Non-commercial group opened 3.8 thousand buy contracts and 0.5 thousand sell contracts. Thus, the net position of non-commercial traders increased by 3.3 thousand. However, the mood of the major players remains "pronounced bearish". And the pound, despite the growth of the net position, still resumed falling. The net position has been falling for 3 months, which is perfectly visualized by the green line of the first indicator in the illustration above or the histogram of the second indicator. Therefore, two increases in this indicator hardly unambiguously indicate the end of the downward trend in the pound. The Non-commercial group has opened a total of 105 thousand sales contracts and only 34 thousand purchase contracts. Thus, the difference between these numbers is more than three times. Note that in the case of the pound sterling, the COT reports data very accurately reflect what is happening on the market: the mood of traders is "very bearish", and the pound has been falling against the US dollar for a long time. In the last few weeks, the pound has shown growth, but even in the illustration in this paragraph (daily TF), this movement looks very weak. Since in the case of the pound, the COT report data shows the real picture of things, we note that a strong divergence of the red and green lines of the first indicator often means the end of the trend. Therefore, formally, now we can count on a new upward trend. However, weak geopolitical, fundamental, and macroeconomic backgrounds for European currencies continue to put pressure on these currencies.

Analysis of fundamental events.

There was not a single interesting event in the UK this week. Hardly anyone now takes business activity indices seriously. The pound spent most of the week in a side-channel (visible on the lower TF), but on Friday, it collapsed due to the US inflation report. Thus, the bulls did not keep the initiative in their hands, and now every new negative event for the pound can provoke a new fall. Given that the Bank of England is unlikely to raise the key rate this month, and the Fed is guaranteed to raise it, we are inclined to believe that the pair's decline will continue, and the 2-year lows will be updated. Inflation in the UK already exceeds the American one, so here the pound is in a disadvantageous position itself.

Trading plan for the week of June 13-17:

1) The pound/dollar pair completed an upward correction very quickly, and now there is very little chance of a new uptrend. The pair could not even work out the Senkou Span A line. Thus, purchases are not relevant again now, and they can be considered no earlier than fixing the price above the Ichimoku cloud. The pair retains theoretical chances of growth, but the pound's position and the aggressiveness of the bulls are not at the level to be sure of growth.

2) The pound sterling, we can say, resumed the downward trend, as it consolidated below the critical line. Formally, on a 24-hour TF, a lateral correction could begin, which is popularly called a "swing". However, so far everything looks as if the fall will continue. Currently, sales with a target of 1.2080 (76.4% Fibonacci) are relevant.

Explanations of the illustrations:

Price levels of support and resistance (resistance /support), Fibonacci levels - target levels when opening purchases or sales. Take Profit levels can be placed near them;

Ichimoku indicators (standard settings), Bollinger Bands (standard settings), MACD (5, 34, 5);

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.