GBP/USD 1H
The downward movement resumed on the hourly chart for the pound/dollar pair last Friday. The general technical picture is now very simple. The price rebound from the Senkou Span B line, that is, not overcoming the Ichimoku cloud, is visible with the naked eye. Accordingly, buyers did not manage to pass the first serious resistance on the way to a new upward trend. Thus, if something unexpected does not happen fundamentally, then we believe that the downward movement will continue with the May 18 low of 1,2073 as the target. It should also be noted that the bears, unlike the bulls, successfully crossed the Kijun-sen line and the support area of 1.2196-1.2216, which increased the chances of a further fall of the pound/dollar pair.
GBP/USD 15M
Both linear regression channels turned around and turned down on the 15-minute timeframe. Therefore, the trend is clearly downward in the short term. The lower channel begins to unfold upward, and traders failed to overcome the 1.2165 level on Friday. Thus, there are certain grounds for assuming an upward pullback. At the same time, we expect the pound to continue falling.
COT Report
The latest COT report for May 19 shows that the total number of buy and sell transactions among large traders per week increased by 29,000, and in equal proportions. Thus, big traders began to actively trade the pound, which, however, is not particularly noticeable on the pair's movement chart, the volatility remains the same, not too high for the pound. Nevertheless, professional traders in the reporting week continued to actively sell British currency (+8303 sales contracts) and they were much less active in acquiring purchase contracts (total +4313). Thus, from our point of view, the mood for the GBP/USD pair remains more downward.
The fundamental background for the British pound remains negative. Despite the fact that macroeconomic statistics come in equally negative from the US and Great Britain, we believe that the British economy continues to experience much more serious problems than the American one. In the near future, the Bank of England can expand the program of quantitative easing by 100 or 200 billion pounds and even introduce negative rates, which indicates a strong decline in the economy, which needs more support. But there is no positive news from the UK. Negotiations between Brussels and London, which are important, first of all, for the British pound, are still at a standstill. As we already figured out on the weekend, Britain does not seek to sign an agreement on the terms of the European Union. Perhaps this is the right decision in the distant future, but in the long term the next 2-3 years, it can finish off the British economy, which already suffers from Brexit for three years, and now also suffers from the coronavirus crisis.
We have two main options for the development of the event on May 25:
1) The initiative for the pound/dollar pair remains in the hands of the bears. Thus, we recommend buying the British pound not before consolidating the price above the Senkou Span B line - 1.2270 and above the resistance level of 1.2280 with the first target resistance level of 1.2399. Take Profit will be about 110 points in this case.
2) Sellers are currently more likely to implement their plans. Bears have already returned to the area below 1.2196-1.2216, which is enough to resume selling the pair while aiming for the May 18 low at 1.2073. In this case, take profit will be about 100 points.
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