GBP/USD 1H
The GBP/USD pair began a downward movement in the morning of August 19, failing to reach the third resistance level of 1.3284. And so there are reasons to assume the end of the fairly long upward trend. Especially if you consider a much weaker fundamental basis for this trend. Therefore, overcoming the support area of 1.3157-1.3181 will make it possible for the pair's quotes to continue moving down. It is not yet possible to say for sure that the bears have taken the initiative in the market, since most likely, the current drop in quotes is due to buyers closing long positions.
GBP/USD 15M
The lower channel of linear regression turned down on the 15-minute timeframe, signaling the possible beginning of a new downward trend. The latest Commitments of Traders (COT) report for the British pound, which was released last Friday, turned out to be almost an exact copy of the report on the euro currency. As for the euro, large traders opened new Buy-contracts in the reporting week (2,569) and closed Sell-contracts (8,405). Thus, the net position for non-commercial traders increased by almost 11,000 during the reporting week, which, in fact, means an increase in bullish sentiment. We could draw the same conclusions based on the nature of the pair's movement itself. Given the fact that we have not seen a normal correction of the British pound for several weeks, we can make a clear conclusion that big traders are not selling this currency now. Therefore, even the COT report does not yet suggest the beginning of a new downward trend. At the same time, quotes began to fall on Wednesday, but this day will not be included in the new COT report, which will be formed for the period of August 12-18. Therefore, it is unlikely that we will see a major change in the mood of non-commercial traders in the new report.
The fundamental background for the GBP/USD pair was interesting on Wednesday, as UK inflation for July was published. And immediately it can be noted that traders, despite a fairly optimistic report, began to get rid of long positions on the pound. Thus, we can safely assume that the report was ignored. But US President Donald Trump recently announced his intention to return the production of American companies from China to the United States. In fact, Trump announced his intention even before he became president. Now Trump is going to impose duties and taxes on companies that leave America and create jobs in other countries (a direct reference to China - approx. author), as well as introduce tax incentives for those who return jobs from China to America. On the one hand, Trump's desire is absolutely logical. On the other hand, he recalled this when the United States had an unprecedented high unemployment rate. Therefore, many analysts believe that Trump is trying to increase his political ratings again with such statements. They say that if Americans elect him for a second term, unemployment will quickly decrease, and new jobs will be created in the country again. "Car factories are opening and developing in Michigan. This has not been the case for the past 42 years. We will end our dependence on China. We will produce our most important medicines and other goods here in the US," the US leader said.
There are two main options for the development of events on August 20:
1) Buyers finally let go of the pound/dollar pair, which immediately led to a fall. Thus, we recommend opening new purchases of the British currency but not before quotes return to the area above 1.3157-1.3181. Although now buyers will have to do it very hard in the near future.
2) Bears got down to business and, together with the bulls, which began to drop longs, started to invest in the dollar. Thus, settling the price below the Kijun-sen line (1.3156) will allow opening short positions with the targets of the Senkou Span B line (1.3084) and the support level of 1.3010. Take Profit in this case will be from 40 to 100 points. After such a strong fall in quotes, an upward pullback is not excluded.
Hot forecast and trading signals for the GBP/USD pair.
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Explanations for illustrations:
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.
The material has been provided by InstaForex Company - www.instaforex.com