GBP/USD 5M
The GBP/USD currency pair also tried to continue the upward correction on Friday, but after the start of Federal Reserve Chairman Jerome Powell's speech, it fell by 160 points. Thus, by the end of the day and the trading week, it was near its 2-year lows and near the level of 1.1716, which is now the lower boundary of the horizontal channel. We have already said that so far this channel cannot be considered strong, since the pair has not spent much time in it. Nevertheless, a rebound from the level of 1.1716 will provoke a new round of upward movement, and then it will already be possible to assume that the pair has climbed into a flat. In any case, the flat will not mean that the downward trend is over. Trends usually end with a sharp retreat of the price in the opposite direction, which is not observed now. Otherwise, overcoming the level of 1.1716 will mean the continuation of the downward movement. The fundamental and macroeconomic background for the pound on Friday was the same as for the euro. It makes no sense to disassemble it separately a second time.
The first trading signal on Friday was false. The price settled below the critical line, but failed to go down 20 points. Therefore, the short position closed at a loss of 18 points. Then a buy signal was formed when consolidating above the Kijun-sen, after which the pair rose to the extreme level of 1.1874. The profit on this trade was 60 points. There were two rebounds from this level, but both occurred when Powell's speech had already begun. Therefore, traders could not take risks (the price could go in any direction and very strongly) and no longer open positions - the day would have ended in profit anyway. But if they worked out a sell signal near the 1.1874 level, they could earn about 100 more points of profit.
COT report:
The latest Commitment of Traders (COT) report on the British pound turned out to be quite interesting. During the week, the non-commercial group opened 14,700 long positions and 9,500 short positions. Thus, the net position of non-commercial traders increased immediately by 5,200. Despite the growth of this indicator for several months now, the mood of the big players still remains "pronounced bearish", which is clearly seen in the second indicator in the chart above (purple bars below zero = bearish mood). To be fair, in recent months the net position of the non-commercial group has been constantly growing, but the pound shows only a very weak tendency to rise. And even then, only from time to time. And now its fall has resumed altogether, so the bearish mood of major players may again begin to intensify in the near future. The non-commercial group now has a total of 86,000 short positions and 58,000 long positions open. The difference is no longer as daunting as it was a few months ago, but it's still there. The net position will have to show growth for a long time to at least equalize these figures. Moreover, COT reports are a reflection of the mood of major players, and their mood is influenced by the "foundation" and geopolitics. If they continue to be as disappointing as they are now, then the pound may still be on the "downward peak" for a long time. It should also be recalled that it is not only the demand for the pound that matters, but also the demand for the dollar, which seems to remain very strong. Therefore, even if the demand for the British currency grows, if the demand for the dollar grows at a higher rate, then the pound will not strengthen.
We recommend to familiarize yourself with:
Overview of the EUR/USD pair. August 29. Jerome Powell pulled down the pair. The hawkish mood of the Fed remains.
Overview of the GBP/USD pair. August 29. Liz Truss is rushing to the prime ministership like an armored train: a possible 5% VAT reduction has been announced.
Forecast and trading signals for EUR/USD on August 29. Detailed analysis of the movement of the pair and trading transactions.
GBP/USD 1H
The pound/dollar pair maintains a downward trend on the hourly timeframe thanks to the trend line. At the moment, everything is going to the fact that the pair will either overcome the level of 1.1716 and continue to fall, or will trade inside the horizontal channel at 1.1716-1.1874 for some time. We highlight the following important levels for August 29: 1.1716, 1.1874, 1.1974, 1.2007. The Senkou Span B (1.1982) and Kijun-sen (1.1808) lines can also be sources of signals. Signals can be "rebounds" and "breakthroughs" 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 US macroeconomic calendars for both the US and the UK contain absolutely nothing on Monday. Thus, there will be nothing to react today. Technical analysis and signals will be in first place in terms of importance.
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.
