GBP/USD 5M
The GBP/USD pair traded quite well on Friday, but volatility was still low, only about 70 points, which is not much for the British currency. There were no macroeconomic events in the UK, while reports on personal income and spending of Americans in April were released in the US, as well as the index of personal consumption expenditures, were published on Friday. In a previous article, we said that these reports are unlikely to cause any market reaction. And just as it turned out, there was no reaction. Several signals were formed during the day and all near the critical Kijun-sen line. Unfortunately, they did not bring profit to traders, and the movements themselves, although they were quite convenient, were still quite difficult to predict a sharp upward turn at the beginning of the US trading session, given that there were no events at that time. Perhaps the markets have reacted to Joe Biden's 2022 budget proposal, which has significantly increased spending (up to $6 trillion), and revenue implies tax increases for rich Americans and large corporations, and even in this case, they lag behind spending by almost $2 trillion. But this information was all the more impossible to predict. The first signal was formed when the critical line was crossed from top to bottom. It was necessary to open short positions here, but after the signal was formed, the price fell by only 17 points, which was not enough to place a Stop Loss order at breakeven. As a result, the price turned up and closed over the Kijun-sen line, bringing a loss of about 20 points. But it was no longer recommended to open long positions on this signal, since at that time two false sell signals were already formed near the critical line (the second one was a rebound from Kijun-sen from below). Therefore, this transaction was the only one within the day. Separately, I would like to say that the pound continues to move as inconveniently as possible and continues to be in a much more obvious flat than the euro/dollar pair. The quotes have been located between the levels of 1.4101 and 1.4219 for the last two weeks, that is, in a 120-point horizontal channel.
Overview of the EUR/USD pair. May 31. The US budget assumes an increase in spending. Why is it dangerous for the dollar?
Overview of the GBP/USD pair. May 31. They continue to talk about inflation in Britain and are preparing for a rate hike in 2022.
GBP/USD 1H
The British pound continues to be in the 1.4100-1.4220 horizontal channel on the hourly timeframe. Neither the upper nor the lower boundaries of this channel were worked out on Friday. Thus, in general, the pair continues to "swing" in the horizontal channel. Consequently, a new round of the downward movement to the level of 1.4101 may begin on Monday, however, it should be understood that the price inside the flat can move absolutely randomly. That's why it's flat. But at the same time, the pound continues to remain in the immediate vicinity of its 3-year highs, and we believe that it will overcome them sooner or later. We continue to draw your attention to the most important levels, of which there are very few now, and trade from them: 1.4080, 1.4101, 1.4219 and 1.4240. Senkou Span B (1.4118) and Kijun-sen (1.4161) lines can also be sources of signals, but they are very weak in a flat. It is recommended to set the Stop Loss level at breakeven when the price passes 20 points in the right direction. The Ichimoku indicator lines can move during the day, which should be taken into account when looking for trading signals. There are no major publications or events scheduled for Monday in the UK and the United States. The pair's volatility may remain low.
We also recommend that you familiarize yourself with the forecast and trading signals for the EUR/USD pair.
COT report
The GBP/USD pair increased by 10 points during the last reporting week (May 18-24). However, in general, the pound continues to rise in price, which is clearly visible on any long-term timeframe. Major market players continue to generally increase long positions, which provides an additional incentive to the British currency. The group of "non-commercial" traders (the most important group) opened only 936 Buy contracts (longs), but at the same time closed 4,700 Sell contracts (shorts) in the reporting week. And so the net position increased again, by more than 5,000 contracts, which means much more for the pound than for the euro. The mood of professional traders has again become a little more bullish, but in the medium term, it is absolutely impossible to say that large players are constantly increasing longs or closing shorts. The second indicator in the chart above, which shows the change in the net position for a group of "non-commercial" traders, shows that big players started to actively built up longs around February, but by mid-March their number began to decline, and has been approximately at the same level since the beginning of April. Thus, the pound continues to rise in price completely out of proportion to the bullish mood of non-commercial traders. Therefore, we continue to believe that the pair is much more influenced by the fact that hundreds of billions and trillions of dollars are infused into the US economy than the actions of major market players. However, most likely, the effect of these two factors is multiplied by each other, which leads to an even stronger result. In our case, the pound continues to grow when it should have fallen to the 30 figure, if the fundamental background from the UK was even slightly taken into account.
Explanations for the chart:
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.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the "non-commercial" group.
