GBP/USD – 1H.
According to the hourly chart, the quotes of the GBP/USD pair on Monday performed a fall to the corrective level of 100.0% (1.3800), a rebound from it, an increase to 1.3859, and a new fall to 1.3800. This morning, another rebound was made from the corrective level of 100.0% (1.3800), which led to a reversal in favor of the British dollar and an increase to the level of 1.3859. The rebound of quotes from this level will allow traders to expect a new turn in favor of the American and a new fall to 1.3800. Closing the pair's exchange rate above the level of 1.3859 will increase the probability of further growth in the direction of the next Fibo level of 76.4% (1.3906). The information background was very strong yesterday. And it was expressed only by the report on American inflation. Governor Andrew Bailey did not say anything important in his speech. As I have already said, the consumer price index in the US rose to 5.4% y/y, and it became known this morning that British inflation also continues to grow and was already 2.5% y/y in June.
Both in the first case and the second, traders were waiting for lower values. Thus, many large numbers came as a surprise to them. Both the dollar and the pound rose after the release of inflation reports. I would venture to assume that the whole point is that now the central banks of the United States and Great Britain will be forced to move faster to complete stimulus programs. Let me remind you that the Bank of England assumed that the increase in inflation is a temporary phenomenon and it will be a maximum of 3% by the end of the year. However, with the current growth rates, British inflation may reach all 4% by the end of the year, and it is difficult to even imagine where American inflation will be if the Fed does not intervene. Thus, in the near future, I expect comments from Andrew Bailey and Jerome Powell, who will have to explain to traders what changes and when to expect. Jerome Powell's performance will take place this evening.
GBP/USD – 4H.
The GBP/USD pair on the 4-hour chart performed a close under the corrective level of 23.6% (1.3870). Thus, the decline in quotes can be continued in the direction of the Fibo level of 38.2% (1.3642). Also, a lot will depend on the level of 1.3859 on the hourly chart, to which the pair has made a return. On the 4-hour chart, closing above the level of 1.3870 will again allow us to count on continued growth.
Overview of fundamentals:
On Tuesday, the calendars of economic events in the UK and the US contained one important entry each, so the information background during the day was very strong.
News calendar for the United States and the United Kingdom:
UK - consumer price index (06:00 UTC).
US - producer price index (12:30 UTC).
US - Chairman of the Federal Reserve Board of Governors Jerome Powell will make a speech (16:00 UTC).
US - publication of the Fed's economic review by region "Beige Book" (18:00 UTC).
On Wednesday, an inflation report was already released in the UK, which also excited the trading community. There is still a speech by Jerome Powell and the publication of the economic review "Beige Book". However, I believe that only the first event can cause new strong movements.
COT (Commitments of Traders) report:
The latest COT report on July 7 for the British showed that the mood of the major players has changed again in favor of the bulls. During the reporting week, speculators increased 4,732 long contracts and 1,870 short contracts. Thus, the "bullish" mood of the "Non-commercial" category of traders has slightly increased. But in general, the situation continues to be very similar to the situation for the euro. The "bullish" mood of major players remains, and the advantage of open long contracts is about 1.5 times. Thus, the British dollar retains the chances of resuming growth.
Forecast for GBP/USD and recommendations to traders:
I recommend new purchases of the British with the targets of 1.3906 and 1.3972 if the pair closes above the level of 1.3859 on the hourly chart. I recommend selling the pound today if there is a rebound from the level of 1.3859 with targets of 1.3800 and 1.3741.
Terms:
"Non-commercial" - major market players: banks, hedge funds, investment funds, private, large investors.
"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy foreign currency, not for speculative profit, but to ensure current activities or export-import operations.
"Non-reportable positions" are small traders who do not have a significant impact on the price.
