GBP/USD - 24H.
The GBP/USD currency pair has been steadily declining this week. However, it showed a sharp increase on Friday, which seems to have been provoked by both technical and macroeconomic factors. Recall that we also expect the resumption of the upward trend for the pound. Or its continuation, since the pound has been growing over the past few weeks. We also said earlier that the pound/dollar pair is trading very similar to the euro/dollar pair. The same two corrective turns against the global upward trend. However, the British currency has already begun to rise in price in recent weeks, and a new upward trend is expected. Thus, the pound made a false start, and the euro is late. However, this should not prevent the pound/dollar pair from continuing its upward movement because factors continue to speak in favor of a further fall in the US currency. In principle, both technical and fundamental factors have not changed at all in recent months. The only thing that can support the US currency in the near future is the curtailment of the Fed's QE program. However, in the UK, their QE program may also be completed in the coming months. Thus, even in the future, the support for the US currency is not so strong. However, neither the Bank of England nor the Fed has yet completed QE, so the money supply in the US continues to grow at a higher rate than in the UK, and the dollar can resume a downward trend for itself.
The COT report.
During the last reporting week (August 3-9), the GBP/USD pair fell by 40 points. And, if the major players continue to reduce their net position in the European currency, then professional traders begin to repurchase the British currency. Pay attention to the green line of the first indicator (the "Non-commercial" group) – it has turned up and is growing. Thus, we can now witness the emergence of a new upward trend. During the reporting week, however, the major players were not particularly zealous in opening new contracts. To be more precise, they only closed them. Non-commercial traders have almost 2,000 fewer contracts for buying and 5,500 fewer contracts for selling. However, this still means that the net position has increased by 3,500, and the mood of the most important traders has become more "bullish." It is "more bullish" and not "less bearish" because the "Non-commercial" group has more contracts for buying than for selling (43,700 against 37,600). And this suggests that the "bullish" mood may strengthen in the coming months.
Moreover, the technical picture for the pound is approximately the same as for the euro: the quotes fell to the minimum of the first round of correction against the upward trend and could not continue moving down. Therefore, there is a high probability of a new round of upward movement. As you can see, both COT reports and technical analysis predict approximately the same scenario. Therefore, we have the right to expect the pound/dollar pair quotes to return to the level of 1.4240.
During the current week in the UK, only one day was more or less interesting in macroeconomic events. On Thursday, a report on GDP for the second quarter was published and a report on industrial production. If GDP did not disappoint traders, then the production report was below forecasts. However, these data had only local pressure on the pound. In general, the British currency continues to grow, and the markets are paying more attention to news from overseas. In fairness, it should be noted that an extremely small amount of important information has been coming from the UK recently. Boris Johnson has gone on another vacation. The fourth "wave" of the pandemic has subsided a little, but it has not ended. There was no news from Northern Ireland and the "Scottish referendum." There were no new reports regarding the Brexit negotiations and the "Northern Ireland Protocol" between Brussels and London. Therefore, there is nothing to prevent the pound from returning to its 3-year highs yet.
Trading plan for the week of August 16-20:
1) The pound/dollar pair has been correcting for more than two weeks, but neither the global upward trend nor the local upward trend has been canceled yet. This week, the pair's quotes fell almost to the Kijun-sen line, near which an upward turn may occur. In principle, on Friday, there was already fairly strong growth of the pair, which began in the morning. Thus, we believe that the price will try to grow to the Senkou Span B line in the near future.
2) Sellers squeezed out of the pound/dollar pair everything they could at this stage and let the initiative out of their hands. Thus, it is necessary to return to sales when a new downward trend is formed. For example, if the price is fixed below the critical line. If this happens, the downward movement may resume with the target of 1.3600, but we do not expect such a scenario yet.
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.
