Analysis of GBP/USD, 5-minute chart
The GBP/USD currency pair corrected more confidently than EUR/USD on Monday. The pair lost about 100 points during the day, but it still remains above the trend line and above all the Ichimoku indicator lines, so the upward trend continues. There was no macroeconomic background both in the UK and in the US, but this week there will be at least one significant report on Great Britain, which may become crucial for the pound. If traders so zealously worked out the US inflation report last week, then this week they can also work out the British inflation report, which, most likely, will again show acceleration. And the next acceleration of inflation will automatically mean a very likely increase in the rate of the Bank of England in December by 0.75%, which, in turn, may further increase the demand for the British pound. However, inflation may rise or not, it could but not so much, so the movement can easily be reversed.
All trading signals on Monday formed around the level of 1.1760, although there was no pronounced flat. However, absolutely all trading signals turned out to be false. At the European trading session, it was difficult to assume that everything would be exactly like this, so traders could work out the first two signals. The first one turned out to be an absolute failure when the price settled below the level of 1.1760, since even 20 points in the right direction were not passed. The position closed at a loss. The second signal was more successful, as the price went up 50 pips, so traders could even make a small profit on this trade, but the signal was still considered false.
COT report
The latest Commitment of Traders (COT) report on the British pound showed a slight weakening of the bearish sentiment. In the given period, the non-commercial group closed 8,500 long positions and 11,500 short positions. Thus, the net position of non-commercial traders increased by 3,000, which is very small for the pound. The net position indicator has been slowly rising in recent weeks, but this is not the first time it has risen, but the mood of the big players remains "pronounced bearish" and the pound remains on a downward trend in the medium term. And, if we recall the situation with the euro, then there are big doubts that based on the COT reports, we can expect a strong growth from the pair. How can you count on it if the market buys the dollar more than the pound?
The non-commercial group has now opened a total of 79,000 shorts and 34,000 longs. The difference, as we can see, is still very big. The euro cannot rise even though major players are bullish, and the pound will suddenly be able to grow in a bearish mood? As for the total number of open longs and shorts, here the bulls have an advantage of 21,000. But, as we can see, this indicator also does not help the pound too much. We remain skeptical about the long-term growth of the British currency, although there are certain technical reasons for this.
Analysis of GBP/USD, 1-hour chart
The pound/dollar pair continues its upward movement on the one-hour chart. We consider such a movement somewhat unfounded, however, the market continues to buy, so the movement can theoretically continue as long as you like. However, this week we still expect a serious downward correction. This may be facilitated by reports from the UK.
On Tuesday, the pair may trade at the following levels: 1.1354, 1.1486, 1.1645, 1.1760, 1.1874, 1.1974-1.2007, 1.2106. Senkou Span B (1.1383) and Kijun-sen (1.1594) lines can also give signals if the price rebounds or breaks these levels. The Stop Loss level is recommended to be set to breakeven when the price passes in the right direction by 20 points. The lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. Also, there are support and resistance levels that can be used to lock in profits.
The release of unemployment and wages reports is scheduled for Tuesday in the UK. This is not the most important data, but they can also provoke a small reaction. There will be nothing interesting in America today.
What we see on the trading charts:
Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals.
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines.
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals.
Yellow lines are trend lines, trend channels, and any other technical patterns.
Indicator 1 on the COT charts reflects the net position size of each category of traders.
Indicator 2 on the COT charts reflects the net position size for the non-commercial group.
