GBP/USD 24H.
The GBP/USD currency pair was also in the correction stage this week. However, if there was an upward movement in the first three working days, Thursday and Friday ended in the red. Thus, it is already clear that the pound intends to resume its downward movement. From our point of view, we remind you that the fall of the US currency is still a higher priority scenario. However, corrections should be made and can occur at any time. Last week, the Fed meeting was the impetus for the correction. And this week, the downward movement resumed after the meeting of the Bank of England. Thus, the current drop in quotes is caused by two meetings of central banks. However, in global terms, nothing has changed for the pound/dollar pair. The Fed half-hinted to the markets that it was ready to start discussing the curtailment of the quantitative stimulus program in the near future, and the Bank of England, on the contrary, did not say a word about the possible curtailment of incentives. Thus, it seems that the fall of the British currency and the growth of the dollar are quite logical. However, we would like to draw your attention to the fact that this information was known even before the meetings of both central banks. Or at least it wasn't secret or unexpected. The economy in the United States is recovering at a rapid pace, so it is not surprising that the Fed is starting to think about curtailing stimulus. The UK economy, on the contrary, is recovering slowly, so it is not surprising that the Bank of England is not yet thinking about tightening monetary policy. Thus, we believe that exclusively on the "technique," the pair can continue to decline, as well as the euro/dollar, to its previous local minimum, which is located near the level of 1.3666.
COT report.
During the last reporting week (June 15-21), the GBP/USD pair fell by 180 points. In previous articles, we had already said that it is necessary to wait for this new COT report, which reflects the behavior of market participants for June 16-18, when the markets showed strong volatility due to the summing up of the Fed meeting. And according to the latest COT report, we can draw certain conclusions. During the reporting week, a group of Non-commercial traders closed about 7 thousand purchase contracts and opened 10 thousand sale contracts. Thus, the net position decreased by 17 thousand contracts at once. Considering that about 100 thousand contracts are open by large players, 17 thousand is a lot and shows serious changes in the mood, which has become much less "bullish."
Nevertheless, it remains "bullish" since the total number of open contracts for purchasing the "Non-commercial" group remains 1.5 times greater than the number of contracts for sale. However, the difference is not as strong as in the case of the European currency. On the other hand, professional traders on the pound did not buy the currency headlong in the last year. It is visible on both indicators in the illustration. The first indicator shows that the net position of non-commercial traders (the green line) has grown to only 40 thousand. During the penultimate, strong round of the upward movement, it did not increase very much. The second indicator also clearly shows that large players did not increase their buying positions. Based on these data, we concluded that fundamental global factors were in the first place, for example, the injection of trillions of dollars into the American economy, which led to the fall of the dollar and, accordingly, the growth of the British currency.
During the current week, almost nothing interesting has happened in the UK. They were even considering the fact that the results of the meeting of the British regulator were summed up. However, if the Fed did not report anything extra important to the markets a week earlier, the Bank of England provided even less important information. The British regulator made it clear that there is no chance of curtailing the economic stimulus program at this time, and there was no talk about rates at all. Thus, although the pound began to fall again by the end of the week, it was caused more by the disappointment of traders regarding the absence of any "hawkish" hints from BA. As we said above, on a pure "technique," the pound/dollar pair may continue to fall to the level of 1.1666, but the further prospects for the dollar are too vague. Now it isn't easy to even imagine what can push market participants to new dollar purchases. Thus, in the current conditions, we do not seriously consider the option of further falling of the pair below the 16th level.
Trading plan for the week of June 28-July 2:
1) The pound/dollar pair has started a powerful downward movement, but it is unlikely that such a strong movement will continue. On the older timeframe, we believe that this will be a correction, but in any case, an upward trend and trading for an increase are not relevant now. On lower timeframes, it is recommended to trade down and not try to catch an upward turn. As in the euro case, we believe that the pair may fall to its previous local minimum.
2) Sellers have finally become more active and have started more or less active actions. However, it is still completely unclear whether the bears' fuse will last for a long time since the recent falls of the pound are associated exclusively with two meetings of central banks. But while the trend persists (on lower timeframes), it is necessary to trade down. We believe that the downward movement may end between the levels of 1.3600-1.3665. Nevertheless, there is still a potential for a drop of 200-250 points.
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.
