GBP/USD 5M
The GBP/USD currency pair also traded higher on Monday, despite the fact that there were few fundamental and macroeconomic reasons for this. That is why we conclude that the main growth factor for both the euro and the pound is now technical. After a long and strong fall in European currencies, it's time to correct, and macroeconomic statistics work only as a secondary basis. Recall that in recent months the market has, in fact, ignored the rate hike by the Bank of England several times. Over the past 6-7 trading days, it has grown even on reports that were not important. Thus, traders are now simply taking profits on short positions, which leads to the growth of the British currency. It remains only to understand how strong the growth will be? At this time, it has overcome the Senkou Span B and Kijun-sen lines, which makes it possible to count on further growth. Yesterday's speech by BoE Governor Andrew Bailey did not provide any new information. The pound has so far failed to reach even its previous local high of 1.2637.
There were few trading signals on Monday. Actually, just one. At the very end of the European trading session, the price reached the extreme level of 1.2601 and ideally rebounded from it, forming a sell signal. After that, it went down 30-40 points, and this is how many traders could get by closing the deal manually in the late afternoon. Unfortunately, a stronger move up at night and in the morning was missed as no trading signals were formed at that time.
COT report:
The latest Commitment of Traders (COT) report on the British pound showed almost no change. During the week, the non-commercial group closed 2,800 long positions and 3,200 short positions. Thus, the net position of non-commercial traders increased by only 500. The net position has been falling for three months already, which is perfectly visualized by the green line of the first indicator in the chart above. Or the histogram of the second indicator. The non-commercial group has already opened a total of 106,000 shorts and only 26,000 longs. Thus, the difference between these numbers is already more than four times. This means that the mood among professional traders is now "pronounced bearish" and this is another factor that speaks in favor of the continuation of the fall of the British currency. Note that in the pound's case, the COT report data very accurately reflects what is happening on the market: the mood of traders is "strongly bearish", and the pound has been falling against the US dollar for a very long time. We do not yet see specific signals for the end of the downward trend, however, usually a strong divergence of the red and green lines of the first indicator signals the imminent end of the trend and the beginning of a new one. Therefore, the conclusion is that an upward trend may begin in the near future, but it is dangerous to try to catch its beginning at the lowest point. The pound may well demonstrate another round of decline before it starts to grow.
We recommend to familiarize yourself with:
Overview of the EUR/USD pair. May 24. The euro started the week cheerfully, but will traders find grounds for further longs?
Overview of the GBP/USD pair. May 24. "Northern Ireland Protocol": the United States intervenes in the matter.
Forecast and trading signals for EUR/USD on May 24. Detailed analysis of the movement of the pair and trading transactions.
GBP/USD 1H
It can be seen that a new upward trend and an uptrend line has been formed on the hourly timeframe, which now supports bull traders. Thus, the British currency retains chances for continued growth as long as it is located above the trend line. This is a pretty good time to buy as the bears are finally taking profits on their short positions. Today, we highlight the following important levels: 1.2259, 1.2405-1.2410, 1.2496, 1.2601, 1.2674. Senkou Span B (1.2327) and Kijun-sen (1.2463) lines can also be sources of signals. Signals can be "rebounds" and "breakthrough" of these levels and lines. The Stop Loss level is recommended to be set to breakeven when the price passes in the right direction by 20 points. Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. The chart also contains support and resistance levels that can be used to take profits on trades. The UK is set to publish indexes of business activity in the services and manufacturing sectors. Similar reports will be released in the US. However, these data are still secondary and are unlikely to be followed by a strong market reaction. A more interesting event will be Federal Reserve Chairman Jerome Powell's speech tonight, although, on the other hand, traders already clearly know the US central bank's position on monetary policy. Powell is unlikely to tighten the rhetoric at a time when it is already quite tough.
Explanations for the chart:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the non-commercial group.
