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17.07.202003:49 Forex Analysis & Reviews: Hot forecast and trading signals for the GBP/USD pair on July 17. COT report. A statement by Bank of England Governor Andrew Bailey could trigger the pound's fall

GBP/USD 1H

Exchange Rates 17.07.2020 analysis

The GBP/USD currency pair, unlike the EUR/USD pair, has been trading in different directions for more than a week. The "swing" continued on Thursday, July 16. First, buyers tried to bring the pair back to the resistance area of 1.2634-1.2660, then they failed again and again letting the pound fall into the power of sellers, who, however, did not extract any special dividends for themselves. As a result, the pair starts the new trading day in the same place as the previous ones, and there are still no advantages for either buyers or sellers. Quotes easily pass even the Kijun-sen line, which is considered a strong resistance/support, which also indicates a possible sideways movement. One way or another, it is extremely difficult for bears to go below the support level of 1.2497, and for bulls to go above the level of 1.2660. The lack of channels and trend lines also complicates the situation.

GBP/USD 15M

Exchange Rates 17.07.2020 analysis

Both linear regression channels turned down on the 15-minute timeframe, which allows for a new downward movement. But at the same time, both channels are very weakly directed down, more sideways, so there is no pronounced downward trend now. The latest COT report showed a serious strengthening of bullish sentiment among major traders. Professional traders opened 6,743 Buy-contracts and a total of 12 Sell-contracts during the reporting week. It is obvious that they were only interested in buying the British pound. The total net position in the "commercial" category increased by 6,700. The total number of contracts in the category of commercial traders is approximately 115,000, and the preponderance of Buy over Sell was -21 thousand before the last report. Thus, +6,700 in the net position is a serious strengthening of the bullish mood. However, the British currency did not become more expensive during the entire current week, but it also did not get cheaper. Thus, the new COT report, which will be available today, can show minimal changes among the new contracts.

The fundamental background for the GBP/USD pair has not changed much in recent days, although quite a large amount of macroeconomic data has been received from the UK this week. However, traders ignored most of it, only taking into account that the country's economy is recovering at a much slower pace than experts expected, and unemployment has not increased since the beginning of the pandemic, which also came as a surprise. But of great importance for traders will be Friday's speech by the head of the Bank of England, Andrew Bailey. Recall that in the past few months, traders fear that the British regulator will move to a more serious easing of monetary policy parameters, given the damage caused by the coronavirus crisis and the already wounded Brexit to the British economy. Thus, negative rates are quite an objective reality for the UK in the current conditions. And at the same time, the most serious bearish factor for the pound/dollar pair. It is possible for Bailey to not touch the topic of monetary policy at all. For example, his last speech was devoted to the possibilities of creating a state cryptocurrency. However, Bailey has previously said that the BA is diligently studying the issue of lowering rates to the negative area. This means that sooner or later he will touch on this topic and announce what the regulator has come to.

There are two main scenarios as of July 17:

1) The outlook for the bulls has deteriorated during the trading week. At this time, the pair's purchases are still not relevant, since the quotes went below the ascending channel, and after four attempts, buyers still failed to overcome the important area of 1.2634-1.2660. Thus, we advise you to buy the British pound again, but not before overcoming this area. The targets in this case are the resistance levels of 1.2705 and 1.2791. Potential Take Profit in this case will be from 30 to 110 points.

2) Sellers are advised to consider short positions with the nearest target support level of 1.2497, as the pair's quotes have once again consolidated below the critical line (1.2573). However, at the same time, there is now a high probability of a sideways movement, and the pair has already rebounded from the level of 1.2497 earlier. Thus, a stronger downward movement, with the goals of the Senkou Span B line (1.2463) and the 1.2375 level, is now in question. The potential Take Profit is only about 40 points.

*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

Paolo Greco,
Analytical expert of InstaSpot
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