GBP/USD 1H
The GBP/USD pair also continued its downward movement on September 2 and left the upward channel by the end of the trading day. Thus, the trend for the pound sterling has now changed to a downward one, and the bears have the opportunity to pull the pair down by several hundred points. The nearest target is the Senkou Span B line.
The Kijun-sen line was overcome yesterday, however, as in the case of the euro, an upward correction is likely to follow. However, we still believe that everything will depend on the pair’s buyers and the US fundamental background. We have already made sure that traders seem to have forgotten about all the problems of Great Britain and its economy.
GBP/USD 15M
Both linear regression channels turned down on the 15-minute timeframe, reacting to a rather noticeable downward correction. The latest Commitments of Traders (COT) report for the British pound, which came out on Friday, was completely neutral. Professional traders did not open new buy contracts during the reporting week on August 19-25, despite the fact that the UK currency has started to grow against the dollar and continued to do so at the beginning of the new week.
On the contrary, 9.7000 Buy-contracts and 9,100 Sell-contracts were reduced. Thus, the net position for the non-commercial category of traders slightly decreased. However, this change is so insignificant that it makes no sense to draw conclusions on it. Thus, the general attitude of large traders remains the same. Trading days from September 26 to September 1 will not be included in the new COT report, and it was on these days that the British currency rose in price again.
Thus, in the new COT report, we can see that non-commercial traders significantly increased their net position, while the fall of the last 24 hours is unlikely to be reflected in the report. However, take note that the fall itself is not too strong, no more than 200 points. Therefore, it is unlikely in principle to be reflected in the COT report.
The fundamentals were rather weak on Wednesday, September 2. No important reports or publications were scheduled for this day in the UK. Thus, all hope shifted to the US ADP report. And despite the fact that this report failed, the US dollar still continued to rise in price yesterday. It is difficult to say how long the dollar can continue to strengthen, since there was too much pressure on it in recent months.
We expect the following for today: an index of business activity for the services sector, as well as a speech by the head of the Bank of England Andrew Bailey. Thus, traders can potentially receive important information today, as autumn has begun, and the British economy, like many others, may face new coronavirus problems. Rumors that the Bank of England may further lower the key rate have been circulating for a long time. Bailey has recently stated that the Bank of England has enough instruments at its disposal to support the economy.
Thus, by the end of 2020, both the rate can be lowered and the quantitative incentive program can be expanded. Any hints of the head of the Bank of England about such actions may cause a sell-off in the British currency.
Based on the above, we have two trading ideas for September 3:
1) Buyers retreated from the foreign exchange market. The quotes of the pound/dollar pair have settled below the ascending channel, so now purchases of the pound sterling are not relevant. At the moment, the situation is such that in the near future it will be very difficult to find a buy signal. Even if the upward trend resumes today. The Kijun-sen line did not support the bulls, there was no rebound from it. Thus, we do not recommend you to consider being able to settle above it as a buy signal. Better to wait a while.
2) Bears managed to overcome the ascending channel, so now it is recommended to consider sell orders with the target of the Senkou Span B line (1.3171). If the pair goes above the Kijun-sen line, then sellers will need to wait for the price to settle below this line again and only after that start trading down. Take Profit in this case will be about 110 points.
Explanations for illustrations:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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