Analysis of GBP/USD 5M
GBP/USD also tried to continue its downward movement on Wednesday but began to rise around noon. By the end of the day, the price corrected to a critical line where the bullish correction may end. However, we believe it will be somewhat stronger since a new batch of US data will be released today. We know that almost all reports from across the ocean provoke only a decline in the dollar. It may differ today, but the reports should not be argued with.
Yesterday, both reports on business activity in the UK came in stronger than expected. In contrast, the key report on business activity in the US services sector was disappointing. Thus, the British pound received support during both the European and US sessions. Overall, the technical picture indicates the formation of a new downtrend, but how many times have we seen a similar scenario in recent months? A signal about the change in trend is formed, a week or two passes, and there is no decline in the British currency, after which the uptrend resumes. Of course, we hope this time will be different, but it's too early to celebrate a downtrend.
Among the trading signals from the past day, only the consolidation above the Senkou Span B line and the bounce off the Kijun-sen line can be highlighted. Since both signals were formed between these lines (with a distance of 26 pips), it was meaningless to execute them. Now, we need to wait for the correction to end and hope it is a corrective phase rather than the start of a new, unfounded uptrend.
COT report:
COT reports for the British pound indicate that the sentiment among commercial traders has been constantly shifting in recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, frequently cross each other and are often close to the zero mark. According to the latest report on the British pound, the non-commercial group opened 47,900 buy contracts and closed 200 short ones. As a result, the net position of non-commercial traders increased by 48,100 contracts over the week. Thus, sellers failed to seize the initiative once again.
The fundamental background still does not provide any grounds for long-term purchases of the pound sterling, and the currency has a real chance to resume the global downward trend. However, the pair has an ascending trend line in the 24-hour timeframe. Therefore, unless the price breaches this trend line, a long-term decline in the pound is not expected. The pound is rising despite almost everything, but even the COT reports show that major players are buying it enthusiastically.
The non-commercial group currently holds 183,300 buy contracts and 50,400 sell contracts. The bulls are taking the lead in the market, but apart from the COT reports, there is no other indication of potential growth for the GBP/USD pair. Such a substantial advantage for buyers suggests a possible trend reversal.
Analysis of GBP/USD 1H
In the 1H chart, GBP/USD can end the current local uptrend and begin the long-awaited decline. The British currency's decline may be mild and short-lived. However, the decline remains the only logical and expected scenario. A bullish correction has started and could last for several days.
For July 25, we highlight the following important levels: 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2516, 1.2605-1.2620, 1.2691-1.2701, 1.2796-1.2816, 1.2863, 1.2981-1.2987. The Senkou Span B (1.2909) and Kijun-sen (1.2935) lines can also serve as sources of signals. Setting the Stop Loss to breakeven when the price moves in the intended direction by 20 pips is recommended. The Ichimoku indicator lines may shift during the day, which should be considered when determining trading signals.
Today, the UK has no significant events or reports planned, but the US is set to release crucial reports on GDP for the second quarter (first estimate) and durable goods orders. These reports could potentially influence the GBP/USD pair. While we don't anticipate a strong market reaction, it's worth noting that GDP forecasts are once again overstated, and it will be challenging to achieve them in reality. As a result, we can't rule out a potential decline in the dollar on Thursday.
Description of the chart:
Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals.
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H 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 is the net position size for each category of traders.
