Analysis of GBP/USD 5M
On Wednesday, the GBP/USD pair showed movements similar to the EUR/USD pair. In the first half of the day, the British pound was under strong market pressure due to the disappointing PMIs in the EU and the UK. The UK reports even turned out to be much weaker than forecasts. The services PMI fell from 51.5 to 48.7 in July, while the manufacturing PMI dropped to 42.5. Therefore, it's not surprising that the pound fell. However, in the second half of the day, the pair rebounded from the lower band of the sideways channel at 1.2620, and in addition to that, US PMIs were released, which were also weaker than expected. As a result, the dollar fell during the US session, which is also logical and predictable.
Speaking of trading signals, they weren't the best, unlike those for the euro. The pair continues to stay within the sideways channel, and the lines of the Ichimoku indicator cause more problems instead of helping. For instance, yesterday the pair initially fell, then rose. But then it paused around the Kijun-sen and Senkou Span B lines, which was confusing. The first buy signal should not have been executed since reports from the UK and the EU were disappointing, and it was illogical for the pound to rise. Overcoming three lines within half an hour made it possible to earn about 50 pips, as the pair hit the 1.2620 level. The buy signal around 1.2620 led to a rise back to the "triple area", and traders could gain about 80 pips. Overall, the day turned out to be quite profitable, but the pair still remains flat.
COT report:
According to the latest report, the non-commercial group of traders opened 7,300 long positions and 3,300 short ones. Thus, the net position of non-commercial traders increased by 4,000 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 90,500 long positions and 39,500 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 proceeds within a sideways track, which is clearly visible in the chart above. The Ichimoku indicator lines are currently weak. Due to the flat phase, we identified the strongest values of the Senkou Span B and Kijun-sen lines, but false and inaccurate signals can still form around them. Yesterday, the pair tested the lower band of the channel, so now we can expect it to move back to the upper band.
On August 24, 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 (1.2714) 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 Thursday, there's nothing particularly noteworthy slated in the UK, while in the US, we're expecting reports on unemployment claims and durable goods orders. These two reports could stir some market reaction in the second half of the day. However, we still have a flat trend, so we might witness random movements.
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.
