According to the hourly chart, the GBP/USD pair continued its incomprehensible movements on Friday, which began on Tuesday. At first, the pair desired to start an upward pullback, but on Wednesday, it became clear that there would be no pullback. The activity of traders decreased more and more every day, and on Wednesday, Thursday, and Friday, the pair spent time between the low and the peak of Tuesday. The downward trend corridor still characterized the mood of traders as "bearish," so the fall of the British dollar may resume at any moment. Such a moment may come even tonight when Jerome Powell's performance begins. Although I do not expect any revelations from the Fed president, it should be recognized that traders can react very violently to his speech. In general, the British pound almost completely copies the euro currency. This is visible even this week. One might think that the information background from the European Union and the UK does not matter now because, otherwise, the euro and the pound would show at least slightly different movements.
In the UK, I can also single out only one business activity index this week, but in the manufacturing sector, which fell to 46. And this index, unlike the American one for the services sector, was perfectly ignored by traders. Thus, it seems that traders are now paying attention only to data from the United States, so Powell's evening speech can greatly affect their mood. All three economies (EU, Britain, USA) are racing towards recession. They were somewhere more pronounced, somewhere less. But it does not seem that traders pay attention to this factor. In America, the economy has been shrinking for two quarters in a row, and the dollar is still at its highs in pairs with the euro and the pound, whose economies have not yet shown a slowdown. Maybe everything depends only on the Fed and its plans for monetary policy.
On the 4-hour chart, the pair dropped to the corrective level of 161.8% (1.1709) and rebounded. Thus, a reversal was made in favor of the British, and growth began toward the 1.2008 level. Fixing the pair's exchange rate below the level of 1.1709 will work in favor of the US currency and increase the likelihood of a further fall of the British. The CCI indicator is now brewing weak "bearish" divergences.
Commitments of Traders (COT) Report:
Over the past week, the mood of the "non-commercial" category of traders has become slightly less "bearish" than a week earlier. The number of long contracts in the hands of speculators increased by 1,865 units, and the number of short - by 506. Thus, the general mood of the major players remains the same – "bearish," and the number of short contracts is still much higher than the number of long contracts, but much less than before. The big players stay in the pound sales for the most part, and their mood is gradually changing towards "bullish," but this process is still very far from completion. The pound has shown weak growth in recent weeks, and COT reports so far make it clear that the Briton is more likely to continue its decline than to start a long upward trend.
News calendar for the USA and the UK:
US - speech by the head of the Fed, Mr. Powell (14-00 UTC).
On Friday in the UK, the calendar of economic events does not contain a single interesting entry. In the US, there will be several reports unlikely to interest traders, as well as Powell's speech. Thus, the influence of the information background in the rest of the day can be quite strong.
GBP/USD forecast and recommendations to traders:
I recommend new sales of the British when rebounding from the level of 1.1883 on the hourly chart with a target of 1.1709. I recommend buying the British when fixing the pair's rate above the downward trend corridor on the hourly chart with a target of 1.2007.
Trading analysis offered by Flex EA.
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