GBP/USD 1H
The GBP/USD pair continued to trade in a narrow price range between the Kijun-sen line and the resistance level of 1.2915 on September 30. Therefore, the technical picture has not changed compared to the previous day. Sellers made an attempt to resume the downward movement, crossed the Senkou Span B line, but could not go below the Kijun-sen. Buyers remain in a more advantageous position, but now they need to overcome the 1.2915 level in order to count on maintaining growth. Bears still need to pull the pair back below the Senkou Span B and Kijun-sen lines in order to expect the downward trend to resume. The general trend remains uncertain, as there is no clear upward trend now.
GBP/USD 15M
Both linear regression channels turned to the downside on the 15-minute timeframe, but only formally. In fact, they are directed more sideways than down. The latest Commitment of Traders (COT) report for the British pound showed that non-commercial traders got rid of buying the pound and opened Sell-contracts (shorts). A group of commercial traders got rid of huge amounts of both longs and shorts of the pound.
We then concluded that the pound sterling is now, in principle, not the most attractive currency for large traders. The new COT report showed absolutely minor changes for the “non-commercial” group. Buy-contracts (longs) fell by 2,000 while Sell-contracts decreased by 1,500. Thus, the net position for non-commercial traders remained practically unchanged for the reporting week (September 16-22). The British pound continued to fall, which can be considered a consequence of the previous reporting week, when the net position of non-commercial traders greatly decreased, by 11,500 contracts.
No changes in the rate of the pound/dollar pair on the 23rd, 24th, 25th, which will be included in the next report. Thus, a long term decline in the pound’s quotes is quite questionable, although the pound is still the most unattractive currency in the foreign exchange market.
The UK GDP for the second quarter in the third estimate was released on Wednesday, September 30. The report showed that GDP contracted by 19.8%, which is slightly less than what previous estimates showed. However, this improvement did not particularly support the British pound, which continued to trade in a very narrow range yesterday. A report on business activity in the manufacturing sector is scheduled for Thursday in the UK, the significance of which is not yet alarming.
However, given the beginning of the second waves of the epidemic in both the European Union and Britain, we can expect that business and economic activity will begin to decline again. The manufacturing PMIs Ism and Markit will also be published in America, which do not cause any concerns yet. The number of new applications for unemployment benefits and the total number of secondary applications will also be released today, which many consider as the absolute value of unemployment.
These are the most important reports of the day, but even they may not generate any reaction from market participants. The overall fundamental background remains more important. And any news regarding Brexit and negotiations between Brussels and London is especially important for the British pound.
We have two trading ideas for October 1:
1) Buyers continue to push the pair upward and have broken through the Kijun-sen and Senkou Span B lines, and have also reached the first resistance level of 1.2915 twice. Thus, you are recommended to stay in long positions while aiming for the resistance area of 1.3004-1.3024 and the 1.3086 level, as long as the pair remains above the Senkou Span B line. Take Profit in this case will be from 70 to 150 points. The current fundamental background is simultaneously bad for both the pound and the dollar.
2) Sellers failed to keep the pair below the critical line, and then failed to return below this line. Thus, now they need to wait for a new price consolidation below the Kijun-sen line (1.2814), and only after that it is recommended to resume trading downward with the target of the support area of 1.2636-1.2660. Take Profit in this case can be up to 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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