GBP/USD 1H
The GBP/USD pair began to correct on September 14 after a 700-point fall, and reached the critical Kijun-sen line by the end of the day. Thus, sellers got a new opportunity to sell the currency pair, since, firstly, there was a correction, and secondly, a rebound was made from the Kijun-sen line. Although the correction is extremely small, nevertheless, the current fundamental background from the UK does not imply a stronger growth for the British currency.
The downward channel remains relevant, and the price has already gone through the area several times, which means a stronger movement to the down side than at the beginning. Nevertheless, this channel continues to signal a downtrend, which is visible to the naked eye. Bulls continue to rest at this time and wait until the price settles above the downward trend channel.
GBP/USD 15M
Both linear regression channels turned upward on the 15-minute timeframe, but we expect the downward movement to come back in the near future. The latest Commitments of Traders (COT) report for the British pound was completely unexpected. Despite the fact that during September 2-8, the pound only fell and lost 700 points during this time, non-commercial traders (the most important group of traders) closed Sell-contracts (shorts) during this period.
Their number has decreased by 8,000. Buy-contracts (longs) were also closed, but in smaller quantities, by only -3,500. Thus, according to the logic of things, the pound was supposed to rise during this period, since the net position in the “non-commercial” category increased. One might think that other categories of traders have had a greater impact on the pound. However, this is not the case either, since commercial traders opened 14,000 Buy-contracts and 9,000 Sell-contracts in the same period of time. That is, the net position has grown for this category, in other words, traders have become more bullish.
Thus, we have witnessed a paradoxical situation when the data absolutely does not correspond to what is happening on the market. The next report, therefore, may show even more serious changes.
Fundamental background for the pound/dollar pair did not change on Monday. No new information from Prime Minister Boris Johnson, and at the time of this writing, the UK Parliament has not yet voted on the resonant bill that involves violating the agreement with the European Union on Northern Ireland. Thus, in the near future, we recommend traders to follow the news feeds very closely, since new information on this topic may appear at any time, and it is not found in the news calendars, since these are not scheduled reports. If the UK Parliament rejects Johnson’s proposal, the pound could sharply rise.
And vice versa, if it accepts, we expect the pound to fall. It is likely that in the event of another defeat, Johnson may make several more attempts to “push” the bill through Parliament. But if he does not succeed, he will just think about resigning, since it turns out that he is not supported by his own party members. Let us remind you that the Conservatives have formed a “majority government”. They don’t need the support of any other party to virtually pass any bill.
We have two trading ideas for September 15:
1) Buyers are out of the market, bears are now ruling the show. Thus, you are recommended to consider buying the pound when the price settles above the downward channel and the Kijun-sen line (1.2908) while aiming for the resistance area of 1.3004-1.3024 and the resistance level of 1.3121. Take Profit in this case will be from 50 to 160 points.
2) Sellers continue to pull down the pair, so short positions remain relevant. Since the price failed to gain a foothold above the critical line, it is now recommended to sell the pair again while aiming for the support area of 1.2634-1.2660, which is the closest. The mood of traders could quickly and dramatically change to bullish if the UK Parliament rejects the “Johnson Bill”. Therefore, the news must be closely monitored. Take Profit in this case can be about 180 points. For safety, we recommend placing a Stop Loss order.
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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