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GBP/USD 1H
The GBP/USD currency pair continued to correct on Friday, October 23. As part of the correction, the price dropped to the Kijun-sen line (the quote settled below it for a bit), as well as to the support area of 1.3004-1.3024. Traders failed to overcome the latter, which allows us to expect a new round of upward movement. Unless, of course, this area is retested and overcome on Monday. However, if it does not happen, then the upward movement will be forced to resume while the target is on the resistance area of 1.3160-1.3184. But we do not know how this potential upward movement will relate to the fundamental background. We have been expecting the pound to fall for several weeks now, and just the other day it reached and rebounded off the 61.8% Fibonacci level from the fall on September 1, which is just inside the 1.3160 -1.3184 area. Thus, we would say that there are more chances for moving down in the medium term.
GBP/USD 15M
Both linear regression channels turned to the downside on the 15-minute timeframe, which indicates a downward correction on the hourly chart and there are no signs of its completion.
COT report
The new Commitments of Traders (COT) report for the pound showed that non-commercial traders were quite active during October 13 to 19. However, at the same time, the last few reports have completely made the situation complicated. The "non-commercial" group of traders opened 4,485 Buy-contracts (longs) and closed 4,072 Sell-contracts (shorts). Thus, the net position of professional traders immediately grew by 8,500 contracts, which is quite a lot for the pound. However, the problem is that non-commercial traders have been building up their net position (strengthening the bullish sentiment) over the past few weeks, and before that they have reduced their net position for several weeks (strengthening the bearish sentiment). Thus, over the past months, professional players have not even been able to decide in which direction to trade. The fundamental background continues to be very difficult and ambiguous for the pound/dollar pair, which is why the trades are so confusing. The pound sterling lost approximately 110 points during the reporting period. And the net positions of commercial and non-commercial traders are now practically zero. In other words, both the most important and largest groups of traders have approximately the same number of Buy and Sell contracts open. Naturally, such data from the COT report does not allow any conclusions, either short-term or long-term.
The UK published indexes of business activity in the manufacturing and services sectors last Friday. Both indices were worse than last month. Accordingly, business activity is declining. And there is a high degree of probability that the UK economy is starting to slow down again, as the second wave of the pandemic swept through Great Britain. However, we can hardly conclude that the reason why the pound fell for most of the day was due to these two indicators. Most likely, it became cheaper for technical reasons. No macroeconomic reports will be released in the UK on Monday, October 26, nor will there be any major events. But we remind traders that there are reports of progress in the London-Brussels negotiations. In addition, more specific information on this topic may appear during the week, which is extremely important for the pound
We have two trading ideas for October 26:
1) Buyers for the pound/dollar pair managed to stay above the 1.3004-1.3024 area. Thus, long positions remain relevant on Monday, and you can aim for 1.3173 if a rebound occurs from the 1.3004-1.3024 area. Take Profit in this case will be up to 110 points. However, take note of very frequent changes in direction of movement and relatively high volatility, so we advise you to be careful.
2) Sellers have taken several steps towards the new downward trend. However, you can only consider sell orders below the 1.3004-1.3024 area and the Senkou Span B line (1.2971) while aiming for the support area of 1.2857-1.2872 and the 1.2823 level. Take Profit in this case can range from 80 to 120 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.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the "non-commercial" group.
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