The hourly chart of the GBP/USD pair
Everything is somewhat more complicated with the GBP/USD pair than it is with EUR/USD. News and reports, when viewed together, give different signals. The market does not take into account some reports and news at all, so they need to be filtered out. From the latest news, we note the weak UK GDP for the month of May, which grew by just 1.8% compared to April 2020. However, before that (in March and April) Britain's GDP was contracting by double digits, so after this fall, growth of 1.8% - this is nothing and can not be considered a strong value. Industrial production in Britain has fallen by 20.0% compared to May 2019 and this is a huge failure. Industrial production is an extremely important report for the economy of any country, since most of the GDP consists of production. The lower production and GDP, the worse the country's economy is. Accordingly, it is more difficult to expect the growth of the national currency. However, things are also so-so in America. The problems are the same – economic. However, in addition to them, there are also epidemiological problems with the coronavirus. Every day in the United States, 50-60 thousand people are reported to be infected, which can't help but affect the country's economy. Thus, the dollar can't be in high demand now either. However, the pound/dollar pair will still have to move in some direction. And technical analysis will help us figure out which one.
Technical analysis tells us that the pair failed to continue its growth above the 1.2665 level. Three attempts to continue the upward movement were made on July 7, 9, and 13, but all were unsuccessful. Thus, we have built a downward trend line (one of the main tools for determining the trend), which just shows that in the near future we can expect quotes to fall. The important support level of 1.2573 (the level from which the price can most likely rebound, but if it consolidates below, it will be a signal to sell) does not allow the price to go below itself yet. Based on these technical constructions there are two possible scenarios:
1) If the pair is fixed below the level of 1.2573 (closing the bar below this level at the end of the hour), then sell with the goal of 70 points down. In other words, we place the Take Profit order near the 1.2475 level.
2) If the pair closes above the trend line at the end of the next hour (we assume that this may happen around the level of 1.2665), this will be a buy signal. In this case, we recommend buying the pair, and you can take the profit around the 1.2735 level manually, or by placing a Take Profit order (after reaching a certain price level, the transaction will close in profit itself). Each day, the pair usually travels the same distance (an indicator of the pair's volatility). At this time, from the lowest to the highest price of each day, the pair passes approximately 90-110 points (more volatile than the EUR/USD pair). Therefore, both targets are set at a safe distance from the intended entry points.
Beginners that trade in the forex market should remember that each transaction cannot be profitable. The development of a clear strategy and money management are the key to success in trading for a long period of time.
The material has been provided by InstaForex Company - www.instaforex.com