GBP/USD 1H
The pound/dollar pair sharply fell and began a strong downward movement on Wednesday, which, however, ended near a new upward trend line, which now supports traders to increase. A rebound from this line and the support area of 1.2196-1.2216 helped the British currency stay in an upward channel, so the pair still maintains prospects for further growth. Moreover, the attempt to overcome the Senkou Span B line was also unsuccessful. Thus, the upward movement may resume on May 28 with the previous goal, the resistance level of 1.2399. Bears will be able to rely on something now only after overcoming the ascending trend line. Although we believe that the pound's fall is still the most likely scenario.
GBP/USD 15M
The lower linear regression channel turned down on the 15-minute timeframe, which already indicates that the upward trend is about to end on the hourly, and the higher channel is turning down. Thus, there are reasons to expect the pound's fall. But now everything will depend on the upward trend line on the hourly timeframe and the ability of buyers to stay above it.
COT Report
The latest COT report showed that the total number of buy and sell transactions among large traders per week increased by 29,000, and in equal proportions. Thus, large traders began to more actively trade the pound. This became noticeable by the increased volatility of the pair at the beginning of the current trading week. During the reporting week, professional traders continued to actively sell the British currency (+8303 sales contracts) and 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. It is on the basis of this conclusion that we expect the British currency to be sold, although it should be recognized that the pound is still more expensive than cheap this week, but this growth is not strong or confident.
The fundamental background for the British pound remains negative. No macroeconomic reports have been planned in the UK for this week at all, and no important news from Great Britain has been received in the first three days. But news continues to flow like a river in the United States. True, most of this flow has no effect on the pound/dollar pair (as well as the euro/dollar pair) right now. These are the so-called "long-term topics." And they are negative for the US dollar and for America. However, for the US dollar and the country's economy, they may be negative in the long run, and there are already a number of factors negative for the UK economy and the pound. Thus, with any successful opportunity, market participants are trying to get rid of the pound, clearly not believing in its long-term prospects. The US dollar rose in price yesterday, but today's reports on durable goods orders and applications for unemployment benefits can support the British pound.
We have two main options for the development of the event on May 28:
1) The initiative for the pound/dollar pair remains in the hands of the bulls, as they managed to stay above the trend line and above the Senkou Span B. line. Therefore, it is now recommended to buy the British pound, since a rebound was made from the area of 1.2196-1.2216 as well as the Senkou Span B line, with targets near the resistance level of 1.2399. The stop loss level can be placed under the trend line and the support area of 1.2196-1.2216. Take profit is about 130 points in this case.
2) Sellers temporarily lost their positions, but will be ready to join the game below 1.2196-1.2216 and below the trend line. In case you decide to consolidate the price below this area, we recommend selling and aiming for the May 18 low at 1.2073. In this case, take profit will be about 110 points.
The material has been provided by InstaForex Company - www.instaforex.com