GBP/USD 1H
After being able to quickly and easily recover to the downward trend line, the GBP/USD pair rebounded from it and resumed an equally strong downward movement on October 15, on track to breaking the Kijun-sen and Senkou Span B lines. However, the bears failed to overcome the important support area of 1.2873-1.2888 in the last two days, therefore, falling even deeper is also in question.
It looks strange or doubtful when the US dollar strengthens against the euro, but the greenback’s rise against the pound appears to be quite reasonable and logical. Therefore, if sellers succeed in pushing the pair below 1.2873-1.2888, then the chances of continuing the downward movement will increase many times.
GBP/USD 15M
The lower linear regression channel turned to the downside again on the 15-minute timeframe, but the movements from the last three trading days have been such that it is time to talk about panic, and not about calm, measured trading.
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.
No news from the UK on Thursday, October 15. The report on applications for unemployment benefits was published in the United States, which showed another decrease in the total number of repeated applications to 10.018 million. Thus, the US unemployment rate continues to decline. The EU summit also began on this day, which should initially have been extremely important for the UK and the British pound, but later ceased to be such, since no one expects any decisions on a trade deal.
Moreover, we received reports that the head of the European Commission, Ursula von der Leyen, was allegedly in contact with an employee of her office who is infected with the coronavirus and therefore could also become infected. The head of the European Commission left the EU summit and went into self-isolation.
Thus, the chances that the summit will take any important decisions regarding the UK are further diminished. The US is set to publish reports on September retail sales, manufacturing, and the University of Michigan Consumer Confidence Index. Traders might ignore all three reports.
We have two trading ideas for October 16:
1) Buyers for the pound/dollar pair have released the initiative from their hands. Thus, long positions are not relevant now, however, if the new trend line is overcome, they can be considered with the targets of 1.3105 and 1.3177. Take Profit in this case will be from 50 to 120 points. However, take note of very frequent changes in the direction of movement, so we recommend trading in small lots.
2) Sellers keep the initiative in their hands, but at the same time they cannot overcome the 1.2873 – 1.2888 area. If they manage to settle below this area, then we will recommend new sell positions on the pair while aiming for the support level at 1.2773. Take Profit in this case can be up to 80 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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