Analysis of GBP/USD, 5-minute chart
The GBP/USD currency pair also continued its upward movement on Tuesday for no reason. Reports of medium importance on unemployment and wages were published in the UK in the morning but neither their values nor their status could in any way provoke a movement of 300 points up. The British pound also managed to fall by 150-170 points in the afternoon. So the volatility just went through the roof yesterday. The upward trend for the pair continues, which is clearly signaled by the trend line and the Ichimoku indicator lines. We would say that the pound has excellent chances for a long-term uptrend, but we consider its current strengthening too fast and too strong. So far, there are no reasons to sell the pair, but we are very afraid because of the groundlessness of the current movement. If the pound grew gradually, everything would be more logical and understandable.
Trading signals on the 5-minute chart were perfect yesterday in terms of accuracy and strength. The first was formed literally at the opening of the European trading session near the level of 1.1760. After that, the price rose to 1.1874 and initially rebounded from it. Therefore, traders were forced to close a long position and open shorts. Profit amounted to about 70 points. The signal to sell turned out to be false and closed at a loss of 32 points. However, right there, near the level of 1.1874, a new buy signal was formed, after which the price went to the levels of 1.1974 and 1.2007, from which it rebounded. On this signal, it was necessary to close longs again and open shorts. Profit - another 70 points. The short managed to earn another 70 pips as the price dropped back to 1.1874. Thus, traders managed to earn almost 200 points of profit yesterday.
COT report
The latest Commitment of Traders (COT) report on the British pound showed a slight weakening of the bearish sentiment. In the given period, the non-commercial group closed 8,500 long positions and 11,500 short positions. Thus, the net position of non-commercial traders increased by 3,000, which is very small for the pound. The net position indicator has been slowly rising in recent weeks, but this is not the first time it has risen, but the mood of the big players remains "pronounced bearish" and the pound remains on a downward trend in the medium term. And, if we recall the situation with the euro, then there are big doubts that based on the COT reports, we can expect a strong growth from the pair. How can you count on it if the market buys the dollar more than the pound?
The non-commercial group has now opened a total of 79,000 shorts and 34,000 longs. The difference, as we can see, is still very big. The euro cannot rise even though major players are bullish, and the pound will suddenly be able to grow in a bearish mood? As for the total number of open longs and shorts, here the bulls have an advantage of 21,000. But, as we can see, this indicator also does not help the pound too much. We remain skeptical about the long-term growth of the British currency, although there are certain technical reasons for this.
Analysis of GBP/USD, 1-hour chart
The pound/dollar pair may begin a long-awaited correction on the one-hour chart. We consider the pound's growth in recent weeks somewhat unfounded. This week we are waiting for another report on British inflation, but it is unlikely to drastically affect the mood of traders.
On Wednesday, the pair may trade at the following levels: 1.1645, 1.1760, 1.1874, 1.1974-1.2007, 1.2106, 1.2185, 1.2259. Senkou Span B (1.1383) and Kijun-sen (1.1679) lines can also give signals if the price rebounds or breaks these levels. The Stop Loss level is recommended to be set to breakeven when the price passes in the right direction by 20 points. The lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. Also, there are support and resistance levels that can be used to lock in profits.
The "report of the week" - inflation for October - is scheduled for Wednesday in the UK. It is expected to rise again, which could theoretically support the pound. But it has already risen in price very much in recent weeks, so we do not expect new growth. There are only minor reports in America, which are unlikely to seriously pique the interest of the market.
What we see on the trading charts:
Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals.
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines.
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 reflects the net position size of each category of traders.
Indicator 2 on the COT charts reflects the net position size for the non-commercial group.
