Analysis of GBP/USD 5M
GBP/USD traded higher on Thursday, in contrast to the EUR/USD, which saw growth. Volatility increased slightly, but this doesn't change the fact that the pair is still trading within a sideways channel. The pair could move in any direction within such a channel, so it could be quite chaotic. Since the lower band of this channel was the last target, it makes sense that the pair is now moving towards the upper band. The pair does not need any macroeconomic or fundamental background for this movement. And there wasn't any yesterday, as there was nothing to note except for the neutral report on US unemployment claims. As a result, we are currently observing purely technical movements within the flat.
On the other hand, yesterday's technical signals were practically ideal, especially in the first half of the day. The Kijun-sen line needed to be adjusted as it moved to the 1.2700 level during the day. The pair bounced off this level during the European trading session. Subsequently, it started a fairly strong upward move, overcame the Senkou Span B line, and reached the 1.2786 mark, where traders should have taken profit. It was about 60 pips. The rebound from 1.2786 should also have been executed using a short position. The price started to fall, overcame the Senkou Span B line once again, and there were no buy signals. Therefore, short positions should have been closed manually closer to the evening. The profit for them was about 35 pips.
COT report:
According to the latest report, the non-commercial group of traders closed 8,900 long positions and 6,300 short ones. Thus, the net position of non-commercial traders fell by almost 2,600 positions in a week. The net position has been steadily growing over the past 11 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. Slowly, sell signals are emerging on the 4-hour and 24-hour charts.
The British currency has already grown by a total of 2,800 pips, from its absolute lows reached last year, which is a significant increase. Without a downward correction, the continuation of the uptrend will be illogical. However, there has been no logic in the pair's movements for quite some time. The market perceives the fundamental background one-sidedly, ignoring any data in favor of the dollar. The Non-commercial group of traders has a total of 83,200 long positions and 36,200 short ones. I remain skeptical about the long-term growth of the pound sterling, and the market has recently begun to pay attention to short positions.
Analysis of GBP/USD 1H
On the 1H chart, the pound/dollar pair continues to trade within a sideways channel. The channel has slightly expanded, so the flat hasn't ended. The lines of the Ichimoku indicator are currently weak, but they worked very well in the market yesterday. However, false and inaccurate signals may form around them. Today, the pair could rise to the level of 1.2807 or something lower.
On August 18, traders should pay attention to the following key levels: 1.2520, 1.2605-1.2620, 1.2693, 1.2786, 1.2863, 1.2981-1.2987, 1.3050. The Senkou Span B (1.2807) and Kijun-sen (1.2700) lines can also be sources of 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 Friday, the UK will release a report on retail sales. Nothing lined up for the US. Therefore, macroeconomics will not have a significant impact on the pair's movement today either, and the price will likely trade within the sideways channel.
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.
