GBP/USD 1H
The GBP/USD pair tried to start correcting on October 12, as did the EUR/USD pair, but failed. Traders failed to settle below the 1.3005-1.3025 area, which is now a support area. Thus, the upward movement resumed, though not strong. In general, the upward trend continues, which is eloquently signaled by the ascending channel.
Corrections, as well as on the euro, are now quite frequent, however, bulls have the initiative. The bears will be able to count on a favorable scenario only after the quotes settled below the critical line.
GBP/USD 15M
Both linear regression channels are directed upward on the 15-minute timeframe, which is a sign of the continuation of the upward movement on the hourly timeframe. There are no signs of the beginning of a downward correction on the smallest timeframe at the moment.
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.
One important event in the UK on Monday, October 12 – a speech from the Bank of England Governor Andrew Bailey. More precisely, not even quite a speech. The central bank conducted a survey among commercial banks regarding their readiness for negative rates. Recall that the British regulator has long been circling around a new cut in the key rate, which is now 0.1%.
However, the economy (even before the official Brexit and before calculating the official losses from the second wave of the COVID-2019 epidemic) is failing again and requires additional stimulation. And additional incentives are the expansion of the quantitative easing program (which traders have no doubt about) and a decrease in the key rate to the negative area.
Within a week, commercial banks must respond to the BoE’s request. Although, by and large, this is called preparing for the introduction of new rates. Although representatives of the British central bank say that such polls do not mean a new easing of monetary policy in the near future. In any case, this is a bearish factor for the pound. And market participants did not take it into account on October 12.
We continue to state that traders continue to ignore most of the macroeconomic information. Unfortunately. Only the general fundamental background matters. And even then, at this time, the US fundamental background is taken into account and the British one is ignored.
We have two trading ideas for October 13:
1) Buyers continue to have the initiative in the market for the pound/dollar pair. Therefore, you can consider long positions while aiming for resistance levels 1.3105 and 1.3177. Take Profit in this case will be from 30 to 90 points. However, we draw the attention of traders to the very frequent corrections of the pair, so it is possible that a fall into the area of the lower line of the ascending channel will take place.
2) Sellers tried to seize the initiative several times, but they did not have enough strength to develop their success. Now the bears need to at least settle below the Kijun-sen line (1.2950) in order to be able to trade down with the targets at the support level 1.2903 and the Senkou Span B line (1.2845). Take Profit in this case can range from 30 to 90 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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