GBP/USD 1H
The GBP/USD pair resumed the upward movement on October 9, which is generally similar to the EUR/USD pair’s recent movements – a slight upward bias and frequent corrections. We have also formed a new rising channel, which supports bullish traders and the pound.
The pair overcame a rather important resistance area of 1.3005-1.3025 last Friday, which significantly increases the likelihood of a succeeding upward movement, however, a downward correction on Monday is quite possible and highly probable. Bears are still out of work and are waiting for new chances from the bulls.
GBP/USD 15M
Both linear regression channels are directed upward on the 15-minute timeframe, which is a sign that the upward movement would continue on the hourly timeframe. The flat is over, but there are currently no signs of starting a downward correction on the smallest timeframe.
COT report
A new Commitments of Traders (COT) report on the British pound showed that non-commercial traders were practically resting between September 29 and October 5. The pound increased by about 140 points in this period, which, in principle, is not so much, a little more than the average daily volatility of this currency. The “non-commercial” group of traders opened 1,093 Buy-contracts (longs) and closed 435 Sell-contracts (shorts) during this time.
Thus, the net position of professional traders slightly increased by 1,500 contracts. However, as with price changes, these changes in the mindset of professional traders are purely formal. It is impossible to draw any conclusions or predictions about the pair’s future movement based on them. In general, the “non-commercial” group has been decreasing its net position since the beginning of September, which means that their bearish mood is strengthening.
In principle, this particular behavior from large traders completely coincides with what is happening on the market during this period of time, but despite the pound’s growth in the last few trading days, it still goes back to falling. Nonprofit traders have more sell contracts, and UK fundamentals remain extremely weak and dangerous for the pound in terms of the outlook for the rest of 2020 and all of 2021.
Several important macroeconomic reports were released in the UK on Friday, October 9. For example, GDP added only 2.1% in August m/m, although forecasts predicted an increase of 4.6%. The indicator of industrial production was also not up to par and only reached +0.3% in August, although no less than +2.5% m/m was expected. But the quarterly estimate of GDP growth rates from NIESR was unexpectedly very positive for September and reached +15.2%.
However, we would recommend paying more attention to the current indicators of the state of the British economy. Given the second wave of the epidemic in Great Britain and the lack of progress in negotiations on a trade deal between the UK and the EU, the prospects for the British economy remain very bleak. However, as we can see, market participants also ignored this package of macroeconomic data, as the pound rose in price on Friday.
Thus, we can draw the same conclusion as before – traders continue to ignore macroeconomic data. Bank of England Governor Andrew Bailey is set to deliver a speech on Monday, who has recently been speaking quite often, and has also quite actively hinted at the use of negative interest rates in the near future. Thus, such dovish rhetoric could theoretically put pressure on the pound. The only question is whether it will be a round of a downward correction while maintaining an upward trend or leaving the rising channel.
We have two trading ideas for October 12:
1) Buyers have seized the initiative in the market. Thus, you can formally consider long positions while aiming for the resistance level 1.3114. Take Profit in this case will be up to 70 points. However, take note of frequent corrections from the pair, so it is possible that a new one will begin today.
2) Sellers seemed to have tried to seize the initiative, but they still did not have enough strength to build on their success. Now the bears need, at least, to settle below the 1.3005-1.3025 area in order to count on a fall towards the Kijun-sen line (1.2945). You can reject this movement in small lots. Take Profit in this case can be up to 50 points. Sellers will be able to count on more but the price must settle below the rising channel.
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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