06.08.202004:02 Forex Analysis & Reviews: Hot forecast and trading signals for the GBP/USD pair on August 6. COT report. Bank of England meeting results may become a starting point for a new downward trend

GBP/USD 1H

The GBP/USD pair also resumed its upward movement on August 5 instead of continuing its downward movement. Thus, consolidating the price below the upward trend line, which we all witnessed, turned out to be a false signal. Things happen. At the moment, the upward trend has resumed, and the pair has reached its five-month highs. It is good that there was no rebound from the Kijun-sen line from below, as this would have been another false signal to sell. Instead, the bulls calmly passed the critical line and are now moving towards the first resistance level of 1.3240. However, the bulls also failed to overcome the previous local high at the 1.3169 level. Therefore, further upward movement is under great question.

GBP/USD 15M

Both linear regression channels turned up on the 15-minute timeframe, a signal for an upward trend in the most short-term plan. The latest Commitments of Traders (COT) report for the British pound was even more suspicious than the previous one. The COT report for July 15-21 showed that non-commercial traders opened more Sell-contracts than Buy-contracts, however, the British pound continued to grow during this period. The COT report for July 22-28 showed approximately the same picture. The non-commercial category of traders, which is considered the "engine" of the market, opened 2,700 Sell-contracts and closed (!) 8,700 Buy-contracts. Thus, the net position for this category of traders has fallen even further, which generally means that the bearish mood has increased. It turns out that professional traders have been getting rid of Buy-contracts or opening Sell-positions for two weeks, and the pound has been falling for only a few days and has already managed to win back all the losses. We believe that this behavior of non-commercial traders still indicates that the market is preparing for a new and prolonged fall in the British currency. By and large, this discrepancy between the actions of professional traders and what is happening in the market is called a divergence, which usually warns of a possible change in the trend.

The fundamental background for the GBP/USD pair remained the same on Wednesday, August 5. Great Britain is now completely calm, but today there will be a summing up of the meeting of the Bank of England, which might interest traders. If the British central bank makes it clear that the forecasts for the economy have deteriorated, or the regulator itself is waiting for a slower economic recovery, or is afraid of a new wave of coronavirus, or is seriously considering the option with negative rates, this can all have a very negative impact on the British currency's positions and could push after which the pound/dollar pair will still begin a new long fall. It is also very noteworthy that the pound is growing in the run-up to the BoE meeting, and not, for example, frozen in place, waiting for the results. However, the euro is also growing, so once again we can conclude that the dollar is falling, and so the single currency is not strengthening. However, we still believe that the British currency has completely exhausted its growth potential. Do not lose sight of BoE Governor Andrew Bailey's speech, since he can also tell the markets a lot of interesting things. In general, today will be a kind of judgment day for the pound.

There are two main scenarios as of August 6:

1) Buyers quickly returned the initiative to their own hands. However, they failed to leave the area above the previous high of 1.3169. Thus, we recommend opening new purchases of the British currency no earlier than 1.3169 with the goals of 1.3240 and 1.3400 resistance levels. The potential Take Profit in this case is from 40 to 200 points.

2) Bears missed their chances, but still have the opportunity to start moving down. It is recommended to open new short positions on the pound/dollar pair while aiming for the Senkou Span B line (1.2908) and the support level of 1.2850 in case of price taking below the Kijun-sen line (1.3073). The potential Take Profit in this case is from 120 to 170 points.