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GBP/USD 5M
The GBP/USD currency pair moved quite actively on July 16, in contrast to the EUR/USD pair. Thus, in our opinion, the reasons for the pound's recent decline should be sought in the UK. Basically, you don't need to spend a lot of time to look for them, since macroeconomic reports were not published there last Friday. The most important topic of the Bank of England possibly ending the stimulus program is at the same stage as in the US, with the Federal Reserve. Thus, we believe that the main reason for the pound's recent decline is the difficult situation with the coronavirus in Great Britain. Yes, despite the fact that the United Kingdom is one of the leading countries in the world in terms of the rate of vaccination of the population and about 70% of the adult population has already received both doses of the vaccine, Britain is now showing new anti-records for cases of the disease. Recall that the highest daily increase in cases in the third wave (the strongest) was 68,000. On Saturday, 54,000 new cases of infection were recorded. The most interesting thing is that tomorrow all quarantine restrictions should be lifted in the country, as previously stated by British Prime Minister Boris Johnson. It will be very interesting to see whether the prime minister will fulfill his promise or will he postpone this not the most reasonable decision, following the advice of doctors and epidemiologists?
In technical terms, it should be noted right away that the pair continues to move mainly in the "swing" mode. This can clearly be seen in the chart below (hourly timeframe). At least 12 signals were formed on the 5-minute timeframe last Friday. Such a huge number of signals was due to the fact that the quotes were still in a limited range for most of Friday, within which there were four important lines and levels at once. All these levels were regularly overcome and rebounds occurred regularly from them. Hence such a wild number of signals. Let's try to figure out how to trade on Friday. The first sell signal was formed immediately when the European session opened. Traders had to open short positions on it. The Senkou Span B line was immediately broken, and a rebound occurred from the level of 1.3800. Therefore, this deal should have been manually closed near the level of 1.3800 (profit of 20 points ) and a long position had to be opened immediately. The price went up very well after that, easily crossed the Senkou Span B and Kijun-sen lines and ideally bounced off the 1.3859 level, where it was necessary to close a long position (38 points of profit) and open a new short one. The price again easily crossed the Kijun-sen and Senkou Span B lines, so one should simply keep shorts open near them. The price then dropped to the level of 1.3800 and again bounced off it perfectly. It was necessary to close shorts again (profit of 34 more points) and open longs. This time the price crossed only the Senkou Span B line, and bounced off Kijun-sen. Therefore, the long position should have been closed near this line (profit of 12 points) and reopened to a short position. This time, on the way down, the price crossed both the Senkou Span B line and the 1.3800 level and continued to move down. Thus, the last short position should have been manually closed in the late afternoon. The profit reached around 43 points. In total, about 150 points of profit could be earned for the day. Those lucky days are rare.
GBP/USD 1H
The pound/dollar pair continues to move in the swing mode on the hourly timeframe. So, now you should trade only on a lower timeframe. There is still no trend line or channel on the hourly timeframe, and all of the pair's movements look very strange and chaotic. Overall, the pound/dollar pair is still the most confusing pair at this time. In technical terms, we continue to draw your attention to the most important levels and recommend trading from them: 1.3731, 1.3800, 1.3859 and 1.3898. Senkou Span B (1.3820) and Kijun-sen (1.3832) lines can also be sources of signals. It is recommended to set the Stop Loss level at breakeven when the price passes 20 points in the right direction. The Ichimoku indicator lines can move during the day, which should be taken into account when looking for trading signals. There will be no important or interesting reports or events in the UK and US on Monday. However, the volatility for the pound/dollar pair may remain quite high, and the pound itself may continue its downward movement.
We also recommend that you familiarize yourself with the forecast and trading signals for the EUR/USD pair.
COT report
The GBP/USD pair rose by 35 points during the last reporting week (July 6-12). However, this is not a price change that can be considered significant. During the reporting week, the group of traders "non-commercial" opened only 1,700 sell contracts (shorts), but at the same time it closed 8,000 buy contracts (longs). Thus, the net position of professionals has decreased by almost 10,000 contracts. Considering that only around 100,000 contracts were opened for the major players before last week, then 10,000 is a serious change in the mood of professional players. Thus, the mood of non-commercial traders has become much less bullish than before, and is already approaching the concept of neutral, as they have 43,000 buy contracts and 36,600 sell contracts left open. Almost complete equality. Based on this, we can assume that the pound may continue to fall. From our point of view, the pound currently has more chances for a further fall than the euro. This is supported by the difficult epidemiological situation in the UK, as well as a stronger decline in the net position. However, one should not write off the fact that the Federal Reserve and the US Treasury are injecting trillions of dollars into the American economy. This factor can still strongly influence the demand and supply of the US currency in the foreign exchange market. Consequently, we still expect that the pound/dollar pair may drop to the 1.3600-1.3666 area, but we do not consider the option with a further fall.
Explanations for the chart:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the non-commercial group.
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