GBP/USD 15M
The higher linear regression channel turned to the upside on the 15-minute timeframe, while the lower one turned downward. And so, a new downward trend has started in the short term, but it may be extremely short-lived. By and large, the price continues to revolve around the critical line and around 2.5 year highs.
GBP/USD 1H
The GBP/USD pair initially jumped on Wednesday, then it fell, which is very similar to the EUR/USD pair’s movement. Also, as in the case of the EUR/USD pair, one might say that the 1.3606-1.3626 resistance area has lost its relevance, because the quotes overcame it several times yesterday. Thus, as in the case of the euro, the pound’s situation is confusing and current movements are extremely difficult to work out. An upward trend seems to exist and is clearly visible, but the signals are often false or there are none at all. Important lines and support/resistance levels do not have the desired impact on the price.
Thus, we recommend that traders, first of all, conduct extremely cautious trading, since, given the specifics of the market, it is possible to get quite high losses. A new downward channel even managed to appear yesterday. But it does not clarify the current picture. One could count on a rebound from the Kijun-sen line, but the quotes also crossed this line several times on Wednesday. Thus, you need to wait for strong signals and only focus on them now.
COT report
The GBP/USD pair fell by 15 points during the last reporting week (December 22-28). Despite the fact that around 300 points were passed from low to high during these four trading days. Thus, first of all, we can conclude that the upward trend is still present for the pound. Secondly, there are minimal price changes. A new Commitment of Traders (COT) report showed that professional traders closed both Buy (longs) and Sell (shorts) contracts. In general, there are minimal changes in the number of open/closed contracts for large traders on the pound in recent months. During the reporting week, a group of non-commercial traders closed 1,640 Buy-contracts and 296 Sell-contracts. Thus, this group of traders became a little more bearish.
We can clearly see what is happening among large traders through the two indicators in the chart. The first shows regular changes in the direction of movement of the green and red lines for at least four months. That is, to put it simply, professional traders cannot decide what to do in the long term. We are increasingly inclined to believe that it is not the pound that is getting more expensive, but that the dollar is getting cheaper. Thus, almost everything depends on the demand for the dollar, and not on the actions of large traders on the pound or euro. The second indicator shows that the net position has become bullish for professional traders, but has stopped growing. Thus, according to the latest COT report, we can conclude that non-commercial traders are not too eager for new purchases of the pound.
The fundamentals for the British currency have been extremely weak recently. The news about the new lockdown should have knocked down the pound, but market participants continue to confidently ignore all the negative information coming from the UK. Although the third lockdown will clearly not pass without leaving a trace for the British economy, which is already going through hard times because of Brexit. Actually, this is exactly what the British service business index testifies to, which fell to 49.4 in December, indicating a reduction in the service sector, which suffers the most from any kind of quarantines. Bank of England Governor Andrew Bailey did not tell the markets anything very important during his speech on Wednesday.
Only minor reports are scheduled for release in the UK on Thursday, like the PMI for the construction sector. More interesting publications will come from the United States, where the index of business activity for the ISM services sector will be announced (however, we do not expect it to fall below 50.0), as well as the number of primary and secondary applications for unemployment benefits. This report will allow us to conclude whether the unemployment in the United States continues to decline? In general, America can now boast of stronger macroeconomic reports. But the dollar cannot yet receive any dividends from this.
We have two trading ideas for January 7:
1) Buyers of the pound/dollar pair did not stay above the trend line, but at the same time they refuse to let the bears go even deeper. Thus, if buyers manage to get the pair above the new descending channel, then we recommend buying the pound again while aiming for the resistance level of 1.3753. Take Profit in this case will be up to 75 points.
2) Sellers seem to have seized the initiative in the market, but so far they cannot continue to fall, the price is constantly going back up. Thus, we recommend selling the pound/dollar pair while aiming for the support level of 1.3496 if the pair rebounds off the Kijun-sen line (1.3620) or the upper line of the descending channel. Take Profit in this case can be up to 100 points.
Forecast and trading signals for EUR/USD
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.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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