GBP/USD – 24H.
The GBP/USD currency pair has lost 300 points over the past week. Although before that, for a month or so, it was in a 120-point side channel between the levels of 1.4100-1.4220. Thus, at the moment, a new round of downward correction has begun in the global plan. It is a correction because even after such a strong fall this week, nothing has changed in global terms. The overall upward trend, which began a year and a half ago, has already reached 2,800 points, and the maximum correction within it is 800 points. The last round of the downward movement is currently 460 points, and so far, the price is not even near its previous local low (near the level of 1.3665). Thus, the downward movement may continue in the coming weeks. However, as in the euro/dollar pair case, we do not yet see the pair much below its previous local low. However, at the same time, it is foolish to deny that the downward movement has begun and is a trend on the lower timeframes. And it would help if you only traded according to the trend. Therefore, it is recommended to trade down on the 4-hour and lower timeframes. In the 24-hour timeframe, although the quotes were fixed below the critical line and the Senkou Span B line, it is still unlikely that the downward trend has started now. There is simply no reason to do so at this time. There have been no global changes in the "foundation" or "macroeconomics during the past week." Therefore, the current movement may become another round of correction before a new strong growth of the pair.
COT report.
During the last reporting week (June 8–14), the GBP/USD pair fell by 70 points. However, the new COT report was not released on Friday. Thus, no special conclusions can be drawn on the current mood of the major players yet. We need to wait for the release of a new report. However, it will not give a complete picture of the situation since the last three trading days will not be included. But it was during these three days that the pound lost about 300 points, so we can assume that professional traders closed long positions and opened short ones.
Consequently, the mood of traders could change and become less "bullish." However, all this will become known when the new COT report is published. So far, we can say that nothing much has changed in recent weeks with the mood of the "Non-commercial" group, which is the most important of all. It is not surprising since the pair stood almost in one place for a whole month. We believe that global fundamentals will continue to harm the US dollar. However, this does not mean that the pound cannot fall in the short and medium-term. As for the indicators, they also did not show any changes in recent weeks. In the first indicator, the green and red lines (the net positions of the "Non-commercial" and "Commercial" groups of traders) continue to move sideways. In the second indicator, the histogram is approximately at the same level in recent weeks, which indicates that there are no changes in the mood of professional players.
There are several interesting events in the UK during the current week. However, most of them were ignored by traders. For example, on Tuesday, quite important indicators of unemployment and wages were released, and on Wednesday - the consumer price index for May. However, during the publication of strong statistics on Tuesday, the British pound quotes declined, so it is not necessary to talk about the markets' reaction to the reports. On Wednesday, on the contrary, the British pound grew on the increased inflation in Britain. And these movements continued to be quite weak until the Fed began to sum up its meeting, which happened late on Wednesday. It was from that moment that the pound/dollar pair lost about 300 points. Also, this week, there were two more speeches by Andrew Bailey, which again did not give any new and important information to traders. And on Friday, retail sales data for May were released, which turned out to be much worse than forecasts, which only increased the pressure on the pound. However, it would have continued to fall on Friday and without these statistics, as the euro fell. Thus, the only event to which there was a reaction was the Fed meeting, during which no important decisions were made. All the fundamental global factors remained unchanged, so we expect that the current downward movement will be no more than a correction, but in global terms. On the lower timeframes, these are strong trends.
Trading plan for the week of June 21-25:
1) The pound/dollar pair has started a powerful downward movement, which is now unknown how long it will continue. On the higher timeframe, we believe that this will be a correction, but in any case, the upward trend and trading for an increase are not relevant right now. On lower timeframes, it is recommended to trade down and not try to catch an upward turn. As in the euro case, we believe that the pair may fall to its previous local low.
2) The sellers finally became active and started active actions. True, it is still completely unclear how long the bears' fuse will last, but as long as the trend persists (on lower timeframes), it is necessary to trade down. We believe that the downward movement may end between the levels of 1.3600–1.3665. The potential for a drop of 200 points is still there.
Explanation of illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced before.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.
The material has been provided by InstaForex Company - www.instaforex.com