Analysis of GBP/USD 5M
The GBP/USD pair was trading up on Tuesday. The pound has been falling for about two weeks, but we think that it hasn't been significant enough, considering that before this, the pound was rising for 10 months with hardly any corrections. Currently, we don't see any specific reasons for the pound to resume its uptrend, but then again a few months ago, when a new phase of the uptrend was emerging, there weren't many reasons for it to rise either. Therefore, it wouldn't be surprising if we are seeing a new phase of growth now. The market retains the ability to buy the pound under any conditions. Just yesterday, this happened in the absence of influential economic releases, and the pair went through low volatility. Today, the pair could trade higher as the Federal Reserve approaches the end of the current rate hike cycle.
Only two trading signals appeared on the 5M chart. Initially, the pair rebounded from the level of 1.2863, afterwards it fell by about 40 pips, but couldn't reach the nearest target level. Therefore, the only way to profit from this trade was to anticipate an upward reversal during the US session and manually close it, which was quite challenging. In the middle of the US session, the pair broke through the level of 1.2863 and moved up by 20-30 pips, but this buy signal was formed too late for us to enter the market.
COT report:
According to the latest report, the non-commercial group of traders opened 23,600 long positions and 17,900 short ones. Thus, the net position of non-commercial traders rose by 5,700 positions in a week. It continued to rise. The net position has been steadily growing over the past 10 months as well as the pound sterling. Now, the net position has advanced markedly. This is why the pair will hardly maintain its bullish momentum. I believe that a long and protracted downward movement should begin. COT reports signal a slight growth of the British currency but it will not be able to rise in the long term. There are no drivers for opening new long positions. However, there are no technical signals for short positions yet.
The British currency has already grown by a total of 2,800 pips. Without a downward correction, the continuation of the uptrend will be illogical. The Non-commercial group of traders has opened 135,200 long positions and 71,500 short ones. I remain skeptical about the long-term growth of the pound sterling but speculators continue to buy because the pair is growing.
Analysis of GBP/USD 1H
On the 1H chart, the pound/dollar pair turned upwards around the trend line and has already managed to establish itself above the Kijun-sen line. Therefore, we might witness the start of a new phase of the uptrend, which has been ongoing for 10 months. To support this case, it is advisable to wait for the pair to overcome the Senkou Span B line.
On July 26, traders should pay attention to the following key levels: 1.2598-1.2605, 1.2693, 1.2762, 1.2863, 1.2981-1.2987, 1.3050, 1.3119, 1.3175, 1.3222, 1.3273. The Senkou Span B (1.2945) and Kijun-sen (1.2881) lines can also provide signals, e.g. rebounds and breakout of these levels and lines. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 20 pips. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits.
On Wednesday, there are no important reports or events lined up in the UK. In the evening, the Fed will announce the results of its meeting and will most likely raise the interest rate by another 0.25%. It is unlikely that the dollar will strengthen significantly on this event, as it has been known for a long time. There may be mixed and weak movements during the day, and potentially a storm in the evening.
Description of the chart:
Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;
Yellow lines are trend lines, trend channels, and any other technical patterns;
Indicator 1 on the COT charts is the net position size for each category of traders;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.
