The GBP/USD pair moved almost identically to the European currency on August 6, although the pound had extremely important fundamental factors at its disposal that the euro did not have. However, the quotes of the pound/dollar pair rose to its previous local high of 1.3169 and also failed to overcome it. Thus, in the case of the British pound, buyers were unable to overcome an important resistance and continue forming an upward trend. Therefore, the bears get a new chance to start a downward movement with the lowest level near the previous local low – 1.2980. The question is: do they need these chances?
Both linear regression channels are directed upwards on the 15-minute timeframe, and signal an upward trend in the most short-term plan. The latest Commitments of Traders (COT) report for the British pound was even more suspicious than the previous one. The COT report for July 15-21 showed that non-commercial traders opened more Sell-contracts than Buy-contracts, however, the British pound continued to grow during this period. The COT report for July 22-28 showed approximately the same picture. The non-commercial category of traders, which is considered the "engine" of the market, opened 2,700 Sell-contracts and closed (!) 8,700 thousand Buy-contracts. Thus, the net position for this category of traders has fallen even further, which generally means that the bearish mood has increased. It turns out that professional traders have been getting rid of Buy-contracts or opening Sell-positions for two weeks, and the pound has been falling for only a few days and has already managed to win back all the losses. We believe that this particular behavior of non-commercial traders still indicates that the market is preparing for a new and prolonged fall in the British currency. By and large, this discrepancy between the actions of professional traders and what is happening in the market is called divergence which usually warns of a possible change in the trend.
The fundamental background for the GBP/USD pair remained the same on Thursday, August 6, although Bank of England Governor Andrew Bailey managed to give additional optimism to buyers of the pound, stating that "BA is not going to move to negative rates in the near future", and also raising forecasts for GDP for 2020. However, it seems that even without this information, the pound would have continued to grow today, as the euro did, for example. Meanwhile, the UK is beginning to worry that US President Donald Trump will be defeated in the election and then the trade deal between the UK and the US will not come to fruition, which British Prime Minister Boris Johnson is counting on. Not that it was harder to negotiate with Joe Biden, but rather the opposite. However, the Democrat is a proponent of more global views on trade and will certainly not appreciate London's offer. Plus, we should not forget that the potential deal between London and Washington is almost a personal promise of Trump to Johnson. And at the same time, the US leader wants Britain to have no trade deals with the European Union. Formally, the first meetings to discuss trade issues between the two countries have already been held, but the negotiations have not officially started yet. And if Trump loses the election, it may not start. As we can see, there are still countries in the world that are interested in Trump's re-election.
There are two main options for the development of events on August 7:
1) The buyers quickly returned the initiative to their own hands. However, they cannot go above the previous high of 1.3169. Thus, we recommend opening new purchases of the British currency, but not before we overcome 1.3169 with targets at the resistance levels of 1.3240 and 1.3400. Potential Take Profit in this case is from 40 to 200 points.
2) The bears missed the chances given to them, but still have the opportunity to start a new course down. You are advised to open new short positions in the pound/dollar pair while aiming for the Senkou Span B line (1.2908) and the support level of 1.2850 in case consolidating the price below the Kijun-sen line (1.3083). Potential Take Profit in this case is from 140 to 190 points.