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GBP/USD mostly showed positive trades on Monday. It seems that the pound simply followed the euro. The single currency could have appreciated due to the results of the elections in France, or the dollar could have continued to depreciate because of last week's dismal US reports. However, the pound didn't ponder long about which reason it had to rise on Monday and it just simply went up. The British currency started to fall in the second half of the day, but the movement is so weak that we can't conclude whether it is a correction or the end of the pair's next upward cycle. The price needs to fall at least below the critical line for the first signs of a trend change to appear.
It is also worth noting that the pound has risen by 220 pips without a single pullback or correction. This is quite significant, considering that the average volatility is currently around 50 pips. Yesterday, the price was near its last local high. Since we still don't see any serious grounds for a new upward trend in the medium-term, now might be a good time to sell. We are still not convinced that the market will ignore the fact that the Bank of England might start easing monetary policy at the next meeting. Market makers continue to confuse retail traders, but this can't go on forever.
The pound formed a good buy signal on Monday. At the start of the European trading session, the price bounced off the 1.2796 level, which triggered a 40-pip rise. The price didn't reach the nearest target level, but traders had plenty of time to manually close long positions in profit.
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...
On the 1H chart, GBP/USD failed to overcome the 1.2605-1.2620 area. A new rebound from this area triggered another round of the corrective movement, and now the pair is near its 10-month highs. We expect the pound to fall in the medium-term, but the market is not interested in selling the pound regardless of the fundamental background. If the pair firmly overcomes the 1.2796-1.2816 area, we will consider the possibility of prolonging the upward trend. However, the pound has not firmly consolidated.
As of July 9, 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, 1.2796-1.2816, 1.2863, 1.2981-1.2987. The Senkou Span B (1.2693) and Kijun-sen (1.2751) 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.
On Tuesday, no significant events are scheduled in the UK, while in the US, Federal Reserve Chair Jerome Powell's first testimony in Congress will take place. This event is expected to trigger a market reaction, but given the current volatility, it is unlikely to be strong. Most likely, we will see moderate movements throughout the day. The pound has a good chance of falling, provided that Powell and the inflation report do not spoil things for the dollar once again...
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;
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