GBP/USD 1H
The GBP/USD currency pair continued to trade within the ascending channel and corrected to its lower line on October 6. However, the price failed to settle below the channel, therefore, the upward movement may resume, according to the general trend. The correction began since the price rebounded from the resistance area of 1.3004-1.3024. Thus, the price can return to this area in the first place.
We believe that the upward trend remains rather shaky, since the pound did not have any particular reasons for growth. The dollar does not have them either, so a flat is most likely now.
GBP/USD 15M
The lower linear regression channel turned to the downside on the 15-minute timeframe, which is the first sign of starting a correction on the hourly timeframe. However, the price is supported by the channel line at the bottom of the hourly timeframe. Therefore, if it continues to move down, then the trend will change to a downward one again.
The latest Commitments of Traders (COT) report for the British pound showed that non-commercial traders started to open high-volume sell contracts. In total, 12,000 Sell-contracts (shorts) were opened from September 23-29. At the same time, the “non-commercial” group of traders also closed around 4,000 Buy-contracts (longs). That is, the net position for this category of traders suddenly decreased by 16,000, which is a lot for the pound, given that there are about 100,000 contracts open at this time. The sentiment of non-commercial traders has become much more bearish.
However, the pound only rose in price from September 23-29. It did not grow much, only 140 points, and continues to move up, very uncertainly if I may add. We tend to think that the pound will resume falling in the near future (based on the latest COT reports). As for the indicators, they do not show anything extraordinary now, according to the COT reports. They do not signal a possible global reversal of the pair. Only that non-commercial traders believe more in the dollar’s growth rather than the pound (lower indicator).
No major macroeconomic reports from the UK or America on Tuesday, October 6. Therefore, traders were focused on the general fundamental background, which, we recall, remains extremely weak for both the British pound and the US dollar. We can’t even call the pair’s fall by 70 points as a “provoked foundation”. It could have been a normal technical pullback in order to resume the trend later.
Thus, although the pound continues to rise in price against the dollar, with each new day, more and more questions arise about the expediency and validity of such a movement. Even Saturday’s negotiations between British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen, which resulted in the extension of the negotiation period by a month, cannot be credited to the pound, because the following statements after the talks were “significant differences of opinion remain, in fishing areas in particular, a level playing field (fair competition) and the management of the deal. ”
Thus, although the parties have announced some progress, it is still very difficult to understand what this progress is and on what issue has been achieved. This means that the buyers of the pound still have no particular reasons for optimism.
We have two trading ideas for October 7:
1) Buyers continue to push the pair upward and remain inside the ascending channel. Therefore, you are advised to stay in long positions (or open new ones) while aiming for the resistance area of 1.3004-1.3024 and the 1.3114 level as long as the pair is inside the channel. Take Profit in this case will be from 30 to 130 points. Bulls do not have excessive strength now, however, they are stronger than bears.
2) Sellers failed to seize the initiative on the market several times in a row. The last attempt was made yesterday, but the price failed to settle below the channel. Now they need to wait for the price to settle below the Kijun-sen line (1.2911) and under the ascending channel, and only after that should you resume trading downward while aiming for the Senkou Span B line (1.2825) and support level of 1.2794. Take Profit in this case can range from 70 to 100 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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