GBP/USD 5M
The GBP/USD pair traded in very different directions yesterday. At first, a downward movement was observed, which was replaced by an upward movement in the middle of the European trading session, and at the beginning of the US one - again downward. Thus, the pound/dollar pair was trading differently from the euro/dollar on June 30. However, the overall trend also remains downward. We cannot conclude that the macroeconomic reports on Wednesday strongly influenced the movement of the pair. Perhaps only the ADP report had an impact on the nature of the movement. But, for example, the report on GDP for the first quarter in the UK, which unexpectedly turned out to be worse than analysts' forecasts and reached -1.6% q/q, did not cause any particular reaction. However, the pound fell in price a little after about an hour after the report was published, but after a few hours it was already becoming more expensive. Thus, we cannot make a correlation between the GDP report and the pair's movement in the morning. Only two signals were formed yesterday, both near the 1.3859 level. First, the quotes of the pair crossed this extreme level from the bottom up, and then in the opposite direction. The first signal turned out to be false and should have been manually closed at a loss of around 18 points when the price settled below 1.3859. But the second signal was correct, it was necessary to open short positions, and by the end of the trading day the quotes dropped to the extreme level of 1.3800, where the deal should have been closed, since it was already evening. Thus, on the second deal, we managed to earn about 48 points, which covered the losses from the first signal and allowed traders to earn around 30 points in total. Considering the fact that the pair changed direction twice during the day, this is a very good result. As for the ADP report, which is indicated by the number "2" in the chart, then the dollar started to strengthen after it was published, so we can say that traders worked it out, but, as in the case of the euro/dollar pair, the downward movement was not that sharp, so it is difficult to say how long traders were impressed by this report.
Overview of the EUR/USD pair. July 1. The labor market and inflation as the main factors for the success of the dollar.
Overview of the GBP/USD pair. July 1. The third wave of COVID is gaining momentum in the UK.
GBP/USD 1H
A downward trend line has been formed for the pound/dollar on the hourly timeframe, which clearly indicates a downward trend. This line is much easier to trade with. Overall, the US dollar continues to rise in line with our expectations and forecasts. On the 24-hour timeframe, we concluded that the downward movement may continue to the 1.3600-1.3666 area, since there is a need to form another round of the global correction. The downward trend continues until the price settles above the trend line. In technical terms, we continue to draw your attention to the most important levels and recommend trading from them: 1.3677, 1.3800, 1.3859, 1.4000. Senkou Span B (1.3958) and Kijun-sen (1.3894) lines can also be signal sources. 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. Bank of England Governor Andrew Bailey is scheduled to speak in the UK on Thursday, along with the Markit Manufacturing PMI. The reaction of traders to Bailey's speech will follow only if he informs the markets of something important. Although, as in the case of European Central Bank President Christine Lagarde, we believe that Bailey cannot share new and important information with the markets at each of his speeches. The PMI is likely to be ignored. Therefore, all the attention of the markets can be focused on the ISM PMI in the US.
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 180 points during the last reporting week (June 15-21). We have already said in previous articles that it is necessary to wait for this new Commitment of Traders (COT) report, which reflects the behavior of market participants for the period June 16-18, when the markets showed strong volatility due to the summing up of the Fed meeting. And from the latest COT report, you can really draw some conclusions. A group of non-commercial traders closed about 7,000 buy contracts (longs) and opened 10,000 sell contracts (shorts) during the reporting week. Thus, the net position decreased by 17,000 contracts at once. Considering that at the moment there are about 100 thousand contracts open by major players, 17,000 is a lot and shows serious changes in the mood, which has become much less bullish. Nevertheless, it still remains bullish, as the total number of open buy contracts from the non-commercial group remains 1.5 times greater than the number of sell contracts. However, the difference is not as strong as in the case of the European currency. On the other hand, professional pound traders did not buy the currency at breakneck speed in the last year. This is clearly seen in both indicators in the chart. The first indicator shows that the net position of non-commercial traders (green line) rose to only 40,000, and during the penultimate, strong upward movement, it did not increase very much. The second indicator also clearly shows that large players did not build up their buy positions en masse. It was on the basis of these data that we concluded that global fundamental factors are in the first place, for example, the injection of trillions of dollars into the American economy, which led to the fall of the dollar and, accordingly, the growth of the British currency.
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.
