GBP/USD 5M
Yesterday, the GBP/USD pair moved no better than it did last Friday, when not a single sensible signal was generated. More precisely, it moved even worse, since the entire movement of the day is most of all similar to a flat. As in the case of the European currency, all trading signals formed around the same level. This is because the movement was as horizontal as possible. The 1.3898 level has also been removed from the charts, as it performed very poorly in trading on Monday. During the day, in addition to the US business activity indices, the UK manufacturing sector business activity index was also published. It also did not impress traders, since its actual value for July did not differ at all from either the previous one or the forecast. However, it was after this report that the quotes of the pair slightly fell, by 20 points, so we can talk about the presence of a market reaction. As for trading signals, most of them should have been filtered out. Now we will understand why and how it should be done. The first two signals were formed at the beginning of the European session and both were for long positions. First, the price broke through the level of 1.3898, and then bounced off it from above. Thus, traders had the right to open long positions. True, the upward movement did not last long. In total, the pair managed to go up only 26 points, which was enough to set the Stop Loss level to breakeven. That is why the Stop Loss buy deal was closed. Then the price returned to the level of 1.3898 and began to form a new signal every five minutes. One more signal, perhaps the first one, for traders to sell had the right to work out, but all subsequent ones should definitely be filtered out, since three false signals had already been formed at the level of 1.3898 at once. Thus, traders could have received a loss of up to 10 points on Monday.
GBP/USD 1H
The pound/dollar pair has settled below the upward trend line on the hourly timeframe, so the upward trend has temporarily reversed, and the downward correction is likely to continue. Remember that the results of the Bank of England meeting will be summed up in the UK on Wednesday and the markets can now trade while eyeing this event. That is, it is less active and less risky. So far, at the end of Monday, we see a clean flat. According to all the laws of technical analysis, the correction should continue, so we are waiting for the price to settle below the critical line. In technical terms, we continue to draw your attention to the most important levels and recommend trading from them: 1.3800, 1.3859, 1.3981, 1.4000. Senkou Span B (1.3734) and Kijun-sen (1.3879) 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. No important macroeconomic reports will be published in the UK, the EU, and the US on Tuesday. There are also no other events scheduled for the second trading day of the week. Therefore, tomorrow the markets will have nothing to react to at all. Movements can remain quite sluggish and weakly volatile.
We also recommend that you familiarize yourself with the forecast and trading signals for the EUR/USD pair.
COT report
The GBP/USD pair fell by 200 points during the last reporting week (July 13-19). The data from the latest Commitment of Traders (COT) reports fully support this development: the net position of non-commercial traders is falling, and the pound is also dropping. Thus, everything seems to be logical. However, the first indicator in the chart clearly shows that the upward trend is not ending, but that a new downward trend is about to begin. The green and red lines crossed, which already means a bearish mood of traders. Let us remind you that the green line is the net position of the "non-commercial" group, and the red line is the net position of the "commercial" group. Consequently, at this time, professional players have already opened a larger number of contracts for selling (short) than for buying (longs). And this suggests that major players believe in the further fall of the British currency. But here the same factor also works as for the euro/dollar pair. Trillions of dollars continue to flow into the American economy, which is why its rapid recovery is achieved. However, at the same time, the money supply is growing, inflation is rising, which depreciates the dollar much faster than the sales of the major players of the pound. Consequently, we are fully justified in expecting that the pound will also start to rise in price again, simply because inflating money supply in the United States is more global. During the reporting week, major players immediately opened 11,600 contracts for sale and closed 1,100 contracts for buy. Their net position decreased immediately by 12.7 thousand. Now they already have more open sell positions than buy ones. However, on all these actions of large players, the pound barely managed to get to the last local low, which was formed even when the mood of traders was bullish.
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.
