GBP/USD – 1H.
According to the hourly chart, the GBP/USD pair continued its indistinct movement on Monday, first closing above the corrective level of 50.0% (1.3909) and then below this level. Thus, at this time, the decline in quotes can be continued in the direction of the Fibo level of 38.2% (1.3830). However, closing above the level of 1.3909 will give another opportunity for bull traders to resume the growth process in the direction of the corrective level of 61.8% (1.3989). Yesterday, its information background left much to be desired. The UK released its business activity index in the manufacturing sector, which was even more boring than the European or American. Thus, it was also unable to move the pair from their place. Traders on the pound/dollar are already waiting for the results of the Bank of England meeting. And I must say that it is the Bank of England that can share really important information. We already know that the Fed and the ECB have taken a relatively soft position and are not going to force things, saying that they are already considering the timing of the completion of economic stimulus programs. But the Bank of England is a little closer to becoming one of the first in the world to start curtailing its QE program.
In total, this program has been operating for more than ten years, since it began in 2009 after the global financial crisis. Representatives of the Bank of England have already touched on the topic of ending QE several times. One member of the Bank of England board has already voted for a reduction in QE for two consecutive meetings. However, one vote is not enough. Thus, traders will wait for the strengthening of the hawkish mood of the monetary committee. However, I do not believe that the Bank of England will talk about the end of support for the economy during the fourth wave of the pandemic.
Moreover, many healthcare sector representatives believe that a new wave of coronavirus may overwhelm Europe in the autumn, which may also affect the UK. Thus, I think that the rhetoric of the Bank of England will also be as soft as possible. With any strengthening of the hawkish notes, the British can resume the growth process. However, in any case, it will all be only tomorrow. Today, when there will be no interesting events in Britain, I expect the same movement as yesterday.
GBP/USD – 4H.
The GBP/USD pair on the 4-hour chart performed a fall to the corrective level of 23.6% (1.3870). The formation of a bullish divergence at the CCI indicator and the high probability of a rebound from this level allows us to count on a reversal in favor of the British and a resumption of growth in the direction of the level of 1.4003. Closing the pair's exchange rate under the corrective level of 23.6% will work in favor of continuing the fall in the direction of the next Fibo level of 38.2% (1.3642).
News calendar for the USA and the UK:
On Tuesday, the calendars of economic events in the UK and the US are empty. Thus, there will be no information background today. In the last couple of weeks, this has not upset traders too much, but before the meeting of the Bank of England, traders do not seem to intend to conduct active trading and prefer to wait for its results.
COT (Commitments of Traders) report:
The latest COT report on July 27 for the British showed that the mood of major players remains "bearish." During the reporting week, speculators closed 1,485 short contracts and opened 429 long contracts. As we can see, the changes are small, but the mood has become a little more "bullish." At the moment, the total number of contracts among all categories of traders is almost the same – 180-182 thousand each. The number of short contracts in the "Non-commercial" category of traders is also approximately equal to the number of long contracts. Thus, judging by the COT reports, there is a global trend change for the British dollar, but at the same time, the full balance is maintained at this time. However, the pound is still more inclined to grow, and the chances of a new strong fall are purely theoretical. In the near future, major players may start repurchasing the pound.
GBP/USD forecast and recommendations for traders:
Today, you should buy the pair if a new close is made above the level of 1.3909 on the hourly chart with targets of 1.3989 and 1.4003 on the hourly chart. I recommend selling the pound if there is a rebound from 1.4003 on the 4-hour chart with a target of 1.3909.
Terms:
"Non-commercial" - major market players: banks, hedge funds, investment funds, private, large investors.
"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy foreign currency, not for 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.
