GBP/USD 5M
The GBP/USD currency pair continued to correct on Thursday after it renewed its 2-year lows. Now the lowest level of the value of the pound for the last two years is 1.1716. Recall that the pound's absolute low is around the level of 1.1400. And so far, the pair is doing everything possible to work it out too. The descending trend line remains relevant and keeps the downward trend. The price settled above the critical line, so the correction may continue for some time. At the same time, there is a high probability of a flat between the levels of 1.1716 and 1.1874. So far, we do not see the prerequisites for the resumption of the fall right now. Yesterday, the only event of the day, which we could pay attention to, was the US GDP report for the second quarter. It did not have much influence on the pair's movement. Traders are now clearly resting after another downward spurt, and perhaps waiting for Federal Reserve Chairman Jerome Powell's speech today. We do not believe that Powell will tell the market anything new, but anything can happen. And there may be a reaction.
If the euro/dollar pair tried to trade in a trendy way within the day, then there was a blatant flat on the pound. All trading signals were formed near the Kijun-sen line, and this, we recall, is a sign of a flat. None of the generated signals was correct and did not allow traders to earn. Therefore, it was possible to work out only the first two. The pair bounced twice from the Kijun-sen line at the beginning of the European session, after which it went up more than 20 points. Thus, every time traders could set Stop Loss to breakeven, according to which long positions were closed. As a result, there was no loss, and it was naive to count on profit in the flat.
COT report:
The latest Commitment of Traders (COT) report on the British pound was not impressive. During the week, the non-commercial group opened 1,800 long positions and 500 short positions. Thus, the net position of non-commercial traders immediately increased by 2,300, but this is a minimal change for the pound. Despite the growth of this indicator, the mood of the big players still remains "pronounced bearish", which is clearly seen in the second indicator in the chart above (purple bars below zero = bearish mood). To be fair, in recent months the net position of the non-commercial group has been constantly growing, but the pound shows only a very weak tendency to rise. And now its fall has resumed altogether, so the bearish mood of major players may intensify in the near future. The non-commercial group now has a total of 77,000 shorts and 44,000 longs open. That is, the difference is almost twofold. The net position will have to show growth for a long time to at least equalize these numbers. Moreover, COT reports are a reflection of the mood of major players, and their mood is influenced by the foundation and geopolitics. If they continue to be as disappointing as they are now, then the pound may still be on the "downward peak" for a long time. Take note that when the green and red lines of the first indicator move far away from each other, this is a harbinger of the end of the current trend. But in our case. These lines have been converging for several consecutive months, but the pound is still falling and continues to do so in the long term.
We recommend to familiarize yourself with:
Overview of the EUR/USD pair. August 26. The euro will continue to fall because there are no other options.
Overview of the GBP/USD pair. August 26. Perhaps the new prime minister of Great Britain is ready to press the "nuclear button".
Forecast and trading signals for EUR/USD on August 26. Detailed analysis of the movement of the pair and trading transactions.
GBP/USD 1H
The pound/dollar pair maintains a downward trend on the hourly timeframe thanks to the trend line. In the coming days, the price may try to continue growing and reach the trend line, and further prospects for the pound will depend on whether or not to overcome this line. We highlight the following important levels for August 26: 1.1716, 1.1874, 1.1974, 1.2007. The Senkou Span B (1.1982) and Kijun-sen (1.1796) lines can also be sources of signals. Signals can be "rebounds" and "breakthroughs" of these levels and lines. The Stop Loss level is recommended to be set to breakeven when the price passes in the right direction by 20 points. Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. The chart also contains support and resistance levels that can be used to take profits on trades. There are no interesting events planned for Friday in the UK, and in the US, all the attention is on Powell's speech. It will take place in the evening, at a time when traders will have to slowly close deals and leave the market (if trading intraday). Therefore, it is unlikely that this event will work out according to our strategy.
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.
