Hot forecast and intraday trading signals for the GBP/USD pair for May 20. COT report. Bulls need to confidently overcome

GBP/USD 1H

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The upward movement continued on the hourly chart for the pound/dollar pair on May 19, but within the downward channel. Traders managed to overcome the resistance area of 1.2196-1.2216 by the end of the second trading day of the week, and also work out the upper line of the downward channel. One can even conclude that the pair has consolidated above the descending channel, which currently means a change in the trend. However, so far the bulls are not able to continue moving up, so we recommend not rushing with purchases of the British currency. Perhaps a rebound will still be made from the top line of the downward channel.

GBP/USD 15M

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Two linear regression channels show a rather strong upward movement on the 15-minute timeframe. Thus, there are no signs of ending the upward movement in the short term. Quotes of the pair consolidated above the moving midline and show a willingness to continue moving up.

COT report.

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The latest COT report for May 12 shows that the total number of buy and sell transactions among large traders per week increased by 4,000, mainly due to purchases. However, the total number of transactions for the purchase remains only 16,000 more than transactions for selling. And such an imbalance persists for a long period of time, and it was not enough for the pair to begin forming an upward trend. In the reporting week, professional traders opened more new deals for selling (4539), which means that most of them are waiting for the British currency to fall again.

The fundamental background remains sharply negative for the British pound. We believe that the British economy as a result of the coronavirus pandemic will lose significantly more than the American one, since the "divorce" process with the European Union continues on Great Britain and the parties to the negotiation process cannot agree on the terms of a comprehensive agreement on which they would have to live, coexist and trade with each other after January 31 of the current year. It is not known why Boris Johnson, in spite of the pandemic, is so tough on his position about refusing to postpone the transition period, but the fact remains. Most likely, in 2021, the UK and the EU will trade under the terms of the WTO. An inflation report will be published in Britain today, but we believe that it will have no effect on the pound/dollar.

We have two main options for the development of the event on May 20:

1) The initiative for the pound/dollar pair remains in the hands of the bears, as the price could not clearly indicate its intention to leave the downward channel on the hourly timeframe. Thus, we recommend buying the British pound no earlier than consolidating the price above the Senkou Span B line at 1.2323 and the resistance level of 1.2325 with the first target as the resistance area of 1.2404-1.2422. The next goal, in case of overcoming the area, is the 1.2550 level. Take profit will be about 75 points in the first case and 120 points in the second.

2) Sellers currently have great chances to implement their trading ideas. It will be enough to return the price to the area below the Kijun-sen line and the 1.2196-1.2216 area to resume the pair's sales with the target of the support level of 1.1987. In this case, take profit will be about 190 points.

The material has been provided by InstaForex Company - www.instaforex.com