02.07.202403:01 Forex Analysis & Reviews: Outlook for GBP/USD on July 2. The pound copied the euro's movements

Analysis of GBP/USD 5M

Yesterday, GBP/USD exhibited movements identical to the EUR/USD pair. While the election results in France is directly related to the euro, its relevance to the pound is questionable. Of course, it is possible that the euro is pulling the pound along with it, but over the past six months, these two currencies have shown weak correlation. Therefore, we doubt that the results of the French election were the reason why both the euro and the pound rose overnight and on Monday morning.

However, there are no other explanations for this movement, aside from purely technical ones. We can assume that the market accelerated a bit before both currency pairs start a new downward movement. The pound sterling has a strong support area at 1.2605-1.2620 from below, which it has already failed to breach even after two attempts. Maybe it will be easier to overcome this area once the pair gains momentum. However, just a head's up, the US will release a large amount of important data this week, which can both support the dollar and put pressure on it. Therefore, if the market intended to gain momentum on Monday before it starts a sharp downward move, we can't say that this was a wise move. In any case, the price is moving towards the 1.2605-1.2620 area, and we will soon find out if the third attempt to break through this area will be successful.

There were many trading signals on Monday, but five out of six were formed around the critical line. As we mentioned in previous articles, the Ichimoku indicator lines are not strong in a flat structure, and the pair is obviously trading flat. Therefore, we believe that only the sell signal around the 1.2691-1.2701 area could be executed. This area is the upper boundary of the horizontal channel. After forming this signal, the price fell by at least 40 pips. Traders could have earned that much from this trade.

COT report:

COT reports on the British pound show that the sentiment of commercial traders has frequently changed in recent years. The red and blue lines, which represent the net positions of commercial and non-commercial traders, constantly intersect and mostly remain close to the zero mark. According to the latest report on the British pound, the non-commercial group closed 3,400 buy contracts and opened 200 short ones. As a result, the net position of non-commercial traders decreased by 3,600 contracts over the week. Thus, sellers failed to seize the initiative.

The fundamental background still does not provide a basis for long-term purchases of the pound sterling, and the currency has a good chance to resume the global downward trend. However, the price has already breached the trend line on the 24-hour timeframe at least twice. The level of 1.2800 (which is the upper boundary of the sideways channel) is currently preventing the pound from rising further.

The non-commercial group currently has a total of 102,400 buy contracts and 58,500 sell contracts. The bulls are taking the lead in the market, but aside from the COT reports, nothing else suggests a potential rise in the GBP/USD pair. Such a strong advantage suggests that the pair may fall...

Analysis of GBP/USD 1H

On the 1H chart, GBP/USD is trying its best to continue its downward movement but has yet to overcome the 1.2605-1.2620 area. A new bounce from this area triggered another round of the corrective movement, and a bounce from the 1.2691-1.2701 area sparked a new wave of decline. We insist that the pound fall, but it is quite naive to expect that a pair, which has shown unreasonable growth for more than six months, will suddenly start falling every day. The pair will fall gradually.

As of July 2, we highlight the following important levels: 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2516, 1.2605-1.2620, 1.2691-1.2701, 1.2796, 1.2863, 1.2981-1.2987. The Senkou Span B (1.2740) and Kijun-sen (1.2660) lines can also serve as sources of signals. Don't forget to set a Stop Loss to breakeven if the price has moved in the intended direction by 20 pips. The Ichimoku indicator lines may move during the day, so this should be taken into account when determining trading signals.

Today, there are no significant events scheduled in the UK, but in the US, Federal Reserve Chair Jerome Powell will give a speech, and the JOLTs job openings report will also be published. This is not a crucial report, and Powell may not provide traders with anything new or interesting. However, these events are still capable of influencing the dollar's movement.

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;