GBP/USD 1H
The pound/dollar pair continued its upward movement on Wednesday, June 3, but the movement has already thoroughly weakened. On the way to the highs of April 14 and 30, buyers clearly became more cautious and stopped buying the British pound (and selling the dollar) with the same volumes and with the same zeal. Thus, we believe that in the near future the upward movement may be stopped. There is also a new upward channel on the current chart, however, it is more formal in nature, since it does not originate from the very beginning of the upward movement of the pair and has a too strong inclination angle, which does not imply any correction in principle. Thus, it shows well the strength of the movement of recent days, but is useless for determining the general trend. Based on the foregoing, the pair's new purchases are now considered quite risky. The only trend line is far from the current price, therefore, a downward correction can be very strong, and the upward trend will continue anyway.
GBP/USD 15M
Both linear regression channels continue to be directed upward on the 15-minute timeframe, therefore, there are no signs of an upward trend ending here, just as there are no signs of starting the correctional movement. Only the lower channel can begin to unfold in the coming hours, and even then not down, but sideways.
COT Report
Despite the fact that in total among all major market participants, the demand for the pound sterling did not change during the reporting week (a total of 8600 contracts for buying and selling were opened), professional traders mainly bought the pound sterling - +5205 contracts, and from contracts for on the contrary, they got rid of the sale at -1,686 transactions. Therefore, traders are upbeat and in principle, the situation has not changed at the end of last week. The GBP/USD pair continued to grow in the new week, which means that demand for the pound is not declining. The new COT report may show even greater strengthening of the position of large buyers.
The fundamental background for the British pound remains negative despite the fact that this currency continues to go up in tandem with the dollar. There were practically no important macroeconomic statistics in the UK and the United States this week, and those reports that could have caused interest were again ignored. The most interesting publications came on Wednesday, when just the pair showed the least volatility and stood in one place all day. Thus, traders continue to ignore most of the reports, and in recent days, the British currency should thank the riots in the United States. However, if the euro can still continue to rise in price, then the pound seems to have exhausted its growth potential. All the blame is the fundamental background from the UK itself, which remains very sad and disappointing. We have repeatedly said that the absence of a deal with the European Union, the very fact of Brexit, the epidemic of the coronavirus have a strong negative impact on the British economy, which can continue to decline in 2020 and in 2021, when most countries of the world can already show growth. Thus, in the medium and long term, it will be very difficult for buyers to find the reasons and reasons necessary for opening new positions.
There are two main scenarios as of June 4:
1) The initiative for the pound/dollar pair remains in the hands of buyers, who so far remain in purchases with goals of 1.2642 and 1.2664. However, opening new buy-positions is now associated with increased risks. There is still no correction, which means a high probability of its onset. A short Stop Loss can be set below 1.2529 and, if it works, it is recommended that new purchases be made only after the correction is completed and an upward trend is maintained. Possible Take Profit for current purposes is about 70-90 points.
2) Sellers continue to remain in the shadow and will be ready to return to the market only below the ascending trend line. Of course, short positions can be considered up to this point, but now there are no prerequisites for this at all. We consider the minimum necessary condition for sellers to overcome the area of 1.2403 - 1.2423. Then it will be possible to sell the pair with the goals of the trend line (1.2350) and Senkou Span B line (1.2260). In this case, Take Profit will be from 50 to 130 points.
The material has been provided by InstaForex Company - www.instaforex.com