GBP/USD 1H
The GBP/USD pair moved down 200 points on August 21, as if nothing happened. Everything would be fine if it did not pass 200 points up the day before, and 200 points down the day before, and again 200 points up even earlier. These are the “swings”. We even built a kind of trend channel with a minimal downward slope, although, in fact, this channel is more lateral.
However, the rebound from its lower line suggests an upward movement now, if not to the upper line, then at least to the Kijun-sen line (1.3162). At the same time, consolidating the price below the descending channel will allow you to expect a stronger drop in quotes than 200 points. By and large, the pound has shivered non-stop since June 30 and has grown by almost 10 cents during that time. Thus, 200 points down is not even a correction, it is a pullback.
GBP/USD 15M
The lower channel of linear regression has already turned down on the 15-minute timeframe, but the higher channel on the current “swing” has not yet had time to react. The latest Commitment of Traders (COT) report for the British pound, which was released on Friday, was very predictable. Non-commercial traders reopened 5,880 units of Buy-contracts and closed 2,232 units of Sell-contracts in the period from August 12 to 18.
Thus, the net position for this category of traders increased again, by 8,000 contracts, which is not so small for the pound. In fact, the pound continued to grow against the US currency until August 18, inclusive, so the data from the COT report perfectly accurately reflects what was happening on the market at that time. But even the remaining three days of the week, which are not included in the COT report, do not suggest that the mood of professional traders has changed or will change in the near future.
Thus, it is quite possible to expect that the upward trend will continue. At least until then, until we get additional technical signals for the continuation of the downward movement. By the way, it should also be noted that thanks to the last reporting week, the non-commercial category now has more Buy-contracts than Sell-contracts (52,000 against 49,000).
The fundamental background for the GBP/USD pair was reduced to one main event last Friday – the failure of the next, seventh round of negotiations on the future relationship between Britain and the European Union after Brexit. In addition to this news, it became known that business activity in the UK’s services and manufacturing sectors significantly increased compared to last month. However, this data did not help the pound at all.
Although the news of the failure of the next round of talks is also not a surprise. It is extremely difficult to explain the movements of the previous two days. There will be no macroeconomic publications in the UK and US today. Thus, the influence of the fundamental background should be absent today. Consequently, the pound/dollar pair may begin to adjust after such a strong fall on Friday.
There are two main options for the development of events on August 24:
1) Buyers finally let go of the pound/dollar pair, which has already led to a landslide crash twice. However, this process did not last long. Long positions are advised to be considered again while aiming for 1.3147, if the price settles above the Senkou Span B line (1.3095), and with the target of the upper channel line, if the1.3157-1.3183 area is overcome. Take Profit in this case will be 40 and 50 points.
2) Bears try to dominate again, but bulls do not let them go far down. Consolidating the price below the Kijun-sen line (1.3156) took place, but at the same time the price reached the lower line of the descending channel, thus a rebound and upward movement is possible.
We recommend opening new shorts with targets at 1.3010 and 1.2939 in case of breaking the lower channel line. Take Profit in this case will be from 30 to 100 points.
Hot forecast and trading signals for the GBP/USD pair.
We recommend that you also explore the fundamental background in these articles:
Overview of the EUR/USD pair. August 24. “Four American Crises” continue to keep buyers of the dollar at bay.
Review of the GBP/USD pair. August 24. Which should have been proven: Brexit talks have failed. Brussels tries to revive the “dead horse”. British pound hit by a storm
Explanations for illustrations:
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.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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