GBP/USD 1H
The GBP/USD pair returned to the much-loved resistance area of 1.2634-1.2660 on Monday, which it had previously reached at least four times and rebounded off it each time. Thus, it is possible that this time buyers will not be able to sell it, although each subsequent test, of course, increases the probability of overcoming it and, accordingly, to further strengthen the British currency, which seems to favor the fundamental background. However, the prospects for buyers remain quite vague until this area is overcome, and the pair's movement appears flat in recent weeks. Yesterday, the bulls easily passed the downward trend line, which gave hope that now the bears will begin to attack. But their fervor ended near previous local lows near the 1.2520 level.
GBP/USD 15M
Both linear regression channels turned up on the 15-minute timeframe, which in principle corresponds to the general trend that has developed on the higher chart. However, this trend may come to naught today if the 1.2636-1.2660 area keeps the pair from continuing growth. The latest COT report showed minimal changes compared to the previous one. The British currency mainly continued to strengthen until July 14 (the final date of the report), so it is not surprising that at this time, non-commercial traders (professional players) continued to open 2,811 Buy-contracts. The non-commercial category only opened 182 Sell-contracts (only 12 a week earlier). Although the bullish mood is slightly weakening, which can be seen from the technical picture, the prospects for the British currency remain very attractive, thanks to the improving epidemiological situation in America. Therefore, the latest COT report makes it possible to complete the upward movement on the pair, but overcoming the 1.2636-1.2660 area may return traders' interest in buying the pound.
The fundamental background for the GBP/USD pair remains the same. Nothing interesting happened in either the UK or the US on Monday. Market participants have completely forgotten that negotiations on the terms of mutual co-existence of Britain and the EU after 2020 are firmly stuck in place and London is not very willing to reach a consensus as soon as possible. Thus, the pound's current growth can even be considered as a crackdown before a new long fall, as soon as it becomes clear that there will be no deal between London and Brussels. However, if the epidemiological situation in the United States continues to deteriorate, and British Prime Minister Boris Johnson somehow manages to reach an agreement with Brussels, this could lead to a powerful increase in the pound. At the same time, there are a huge number of factors that can hypothetically send the pair up by 500 points and down by the same amount. For example, the Bank of England may lower the key rate to negative values. For example, a second wave of coronavirus could begin in the UK, as doctors predict. In general, in times of a global pandemic, it is definitely not worth making long-term forecasts, since at any moment everything can change dramatically.
There are two main scenarios as of July 21:
1) The bulls' prospects continue to depend on overcoming 1.2660. At this time, purchases are still not relevant, although buyers managed to overcome the trend line. Thus, you are advised to buy the pound, but not before overcoming the 1.2636-1.2660 area while aiming for the resistance levels of 1.2755 and 1.2846. Potential Take Profit in this case will be from 80 to 170 points.
2) Sellers are advised to consider short positions with the goals of support levels 1.2474 and 1.2383, but to do this, you need to wait until the Senkou Span B line (1.2551) has been overcome. The pair rebounded several times from the previous value of the Senkou Span B line at 1.2414, so the bears may have problems with overcoming this level the next time. So we advise you to wait below 1.2414 before opening the shorts. Potential Take Profit ranges from 30 to 120 points.
The material has been provided by InstaForex Company - www.instaforex.com