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On the hourly chart, the GBP/USD pair has rebounded from the resistance zone of 1.2690–1.2705, which previously acted as a strong support zone. However, traders' sentiment has already turned "bearish," which suggests a potential decline of the pound towards the support zone of 1.2611–1.2620 in the coming days. I believe that the decline will not stop there. Securing quotes above the 1.2690–1.2705 zone will allow the bulls to regain the market initiative.
The situation with the waves has changed slightly. The last upward wave broke the peak from June 4, and the new downward wave managed to break the low of the wave from June 10. Thus, the trend for the GBP/USD pair has turned "bearish." I am cautious about concluding that a "bearish" trend has begun, as the bulls have not completely left the market. The emerging advantage of the bears may still need to be fixed. However, at this time, the 1.2690–1.2705 zone shows us once again that the bears have better prospects.
There was no informational background on Tuesday. All day, the bulls tried to secure above the 1.2690–1.2705 zone, but the lack of informational support did not allow them to do so. This week, there will be two dangerous situations for the dollar. If the UK GDP is stronger than expected and the US GDP is weaker than expected, then the bulls may make another attempt to secure above the 1.2690–1.2705 zone. Otherwise, the pound's decline will continue towards the 1.2611–1.2620 zone. Since there will be very few important economic data this week, I believe that graphical analysis is of paramount importance. Trader activity is still quite low, so the decline to the 1.2620 level may take quite a bit of time.
On the 4-hour chart, the pair reversed in favor of the US dollar and consolidated below the ascending trend line. After rebounding from the 1.2620 level, the pound rose slightly. However, the "bearish" divergence in the CCI and RSI indicators suggests a reversal in favor of the US dollar and a resumption of the decline towards the 1.2620 level. Consolidation of the pair's rate below this level will increase the likelihood of further decline towards the next level of 1.2450.
Commitments of Traders (COT) Report:
The sentiment of the "Non-commercial" category of traders became slightly less "bullish" over the last reporting week. The number of long positions held by speculators decreased by 4,380 units, while the number of short positions increased by 120 units. The bulls still hold a solid advantage. The gap between the number of long and short positions is 48 thousand: 106 thousand versus 58 thousand.
However, the British pound still has excellent prospects for a decline. Technical analysis has issued several signals indicating a breakdown of the "bullish" trend, and the bulls can't keep attacking forever. Over the past 3 months, the number of long positions has increased from 102 thousand to 106 thousand, while the number of short positions has grown from 44 thousand to 58 thousand. I believe that over time, large players will continue to reduce their buy positions or increase their sell positions, as all possible factors for buying the British pound have already been exhausted.
USA – New Home Sales Volume (14:00 UTC)
On Wednesday, the economic events calendar contains only one entry, which is not significant. Therefore, the impact of the informational background on market sentiment today will be either absent or very weak.
Selling the British pound is possible upon a rebound from the 1.2690–1.2705 zone with a target of 1.2611–1.2620. Buying could be considered upon a rebound from the 1.2611 (or 1.2620) level with a target of 1.2690–1.2705. This target has been achieved. New purchases are possible upon closing above the 1.2690–1.2705 zone with a target of 1.2788.
Fibonacci level grids are constructed at 1.2036–1.2892 on the hourly chart and at 1.4248–1.0404 on the 4-hour chart.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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