Analysis of GBP/USD, 5-minute chart
The GBP/USD pair grew on Thursday as if nothing had happened. Recall that I said that the pound could rise against the dollar this week because the British Supreme Court ruled that Scotland does not have the power to hold a new referendum, which would have likely been won by independence supporters. Thus, Britain could lose part of its territory and economy in a matter of years if such a referendum had been held. However, London has not and will not consent to such a referendum, and Edinburgh has not been able to resolve the issue through the courts (British, by the way). Therefore, this is positive news for the pound. For instance, the same report on Wednesday did not provide any reason to buy the pair. British business activity indices remained below the "waterline" and the ones from the US, though they fell below the critical level of 50.0, are not so important that the dollar falls by 200-300 points after its release. But from a technical point of view, the uptrend is still preserved, so it had and has the right to rise. We still expect the pair to settle below the ascending trend line and the trend to change into a downward one.
Despite the fact that the pair grew yesterday, it spent most of the day hovering in the flat near the level of 1.2106. All the signals were formed near that level, while volatility was about 100 pips, which is not much in the current conditions. Yesterday traders could try to use the first two signals, both of which were sell signals. After the first one the price went down 35 pips, which was enough to place Stop Loss Breakeven. After the second and third signals, which duplicated each other, the price failed to go down by just 20 pips, so there was a small loss on the second short position. All subsequent signals should not have been triggered, since the first three turned out to be false.
COT report
The latest Commitment of Traders (COT) report on GBP logged a slight decrease in bearish sentiment. In the given period, the non-commercial group closed 1,900 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 is gradually growing during the last months, but the sentiment of the big players is still bearish. The pound has been rising in recent weeks, but so far it does not seem that it is preparing for a long-term uptrend. And, if we remember the euro's situation, then based on the COT reports, we can hardly expect a surge in price. The demand for the US currency remains very high, and the market, as it seems, is just waiting for new geopolitical shocks so it can return to buying the dollar. The non-commercial group now has a total of 67,000 shorts and 34,000 longs opened. As we can see, there is a wide gap between them. As it turns out the euro is now unable to show growth when market sentiment is bullish. When it comes to the total number of long and short positions, here bulls have an advantage of 17,000. Still, this is not enough for the sterling to increase. Anyway, we are still skeptical about the pound's long-term growth although the technical picture shows otherwise.
Analysis of GBP/USD, 1-hour chart
The price resumed the uptrend on the one-hour chart, and it still does not cause any questions and doubts. The euro's growth is probably supported by the pound. However, we still think that the British currency rose too much in recent weeks, which does not meet the fundamental and macroeconomic background. So we expect that the pair will cross the trend line and fall. On Friday, the pair may trade at the following levels: 1.1645, 1.1760, 1.1874, 1.1974-1.2007, 1.2106, 1.2185, 1.2259, 1.2342. The Senkou Span B (1.1680) and Kijun Sen (1.1963) lines may also generate signals. Pullbacks and breakouts through these lines may produce signals as well. A Stop Loss order should be set at the breakeven point after the price passes 20 pips in the right direction. Ichimoku indicator lines may move during the day, which should be taken into account when determining trading signals. In addition, the chart does illustrate support and resistance levels, which could be used to lock in profits. There are no important events or reports for Friday in the UK and the USA. Therefore, traders will have nothing to react to. Nevertheless, there could still be a trend and volatile movement may still persist since the price broke out of the horizontal channel and retained the uptrend.
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.
