Outlook for GBP/USD on October 27. COT report. The pound is advancing before it falls again
October 27, 2023 7:23 am
Analysis of GBP/USD 5M
The British pound hardly showed any notable movements on Thursday. Although the European Central Bank meeting had no direct impact on the pound, we warned you that the euro could influence the pound, which is exactly what happened. However, the market had a weak reaction to the ECB meeting. Even the US reports, consisting of important data like GDP and durable goods orders, weren’t compelling for the market to react to. As a result, there were no particularly strong or trend-setting movements. The pound edged down during the Asian session, was flat during the European session, and drifted slightly higher during the US session.
Only one trading signal was generated, if we can even consider it a trading signal. During the US session, the price spent several hours trying to overcome and bounce off the level at 1.2109. There was no point in trading this buy signal, as it formed during the ECB meeting and the release of important US data. There was a significant risk of strong and abrupt movements, which, in the end, did not materialize. However, trading in a flat market can be just as risky as volatile price swings. In addition, the signal itself was inaccurate and unconvincing.
COT report:
COT reports on the British pound also align perfectly with what’s happening in the market. According to the latest report on GBP/USD, the non-commercial group closed 700 long positions and opened 400 short ones. Thus, the net position of non-commercial traders decreased by another 1,100 contracts in a week. The net position indicator has been steadily rising over the past 12 months, but it has been firmly decreasing over the past two months. The British pound is also losing ground. We have been waiting for many months for the sterling to reverse downwards. Perhaps GBP/USD is at the very beginning of a prolonged downtrend. At least in the coming months, we do not see significant prospects for the pound to rise, and even if we’re currently witnessing a corrective phase, it could persist for several months.
The British pound has surged by a total of 2,800 pips from its absolute lows reached last year, which is an enormous increase. Without a strong downward correction, a further upward trend would be entirely illogical (if it is even planned). We don’t rule out an extension of an uptrend. We simply believe that a substantial correction is needed first, and then we should assess the factors supporting the US dollar and the British pound. A correction to the level of 1.1844 would be enough to establish a fair balance between the two currencies. The non-commercial group currently holds a total of 65,500 longs and 76,700 shorts. The bears have been holding the upper hand in recent months, and we believe this trend will continue in the near future.
Analysis of GBP/USD 1H
On the 1H chart, GBP/USD tried to form a new corrective wave, but it quickly ended near the level of 1.2269. Currently, the pair has dropped below the Ichimoku lines and the critical level of 1.2109. This suggests that the medium-term downtrend has started again. If, during the current upward retracement, the price does not rise above the Kijun-sen line, we can expect a new downward wave. Yesterday’s economic reports were expected to trigger a new downward movement.
As of October 27, we highlight the following important levels: 1.1760, 1.1874, 1.1927-1.1965, 1.2052, 1.2109, 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2520, 1.2605-1.2620, 1.2693. The Senkou Span B (1.2213) and Kijun-sen (1.2177) lines can also be sources of signals. Signals can be “bounces” and “breakouts” of these levels and lines. It is recommended to set the Stop Loss level to break-even when the price moves in the right direction by 20 pips. The Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. The illustration also includes support and resistance levels that can be used to lock in profits from trades.
On Friday, there are no significant events scheduled in the UK, and we only have a few minor reports in the US. We could expect low levels of volatility, but then again how much lower can it actually go? What’s ironic is that it might gradually increase today.
Description of the chart:
Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;
Yellow lines are trend lines, trend channels, and any other technical patterns;
Indicator 1 on the COT charts is the net position size for each category of traders;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.
The material has been provided by InstaForex Company – www.instaforex.com
Analysis of GBP/USD 5M
The British pound hardly showed any notable movements on Thursday. Although the European Central Bank meeting had no direct impact on the pound, we warned you that the euro could influence the pound, which is exactly what happened. However, the market had a weak reaction to the ECB meeting. Even the US reports, consisting of important data like GDP and durable goods orders, weren’t compelling for the market to react to. As a result, there were no particularly strong or trend-setting movements. The pound edged down during the Asian session, was flat during the European session, and drifted slightly higher during the US session.
Only one trading signal was generated, if we can even consider it a trading signal. During the US session, the price spent several hours trying to overcome and bounce off the level at 1.2109. There was no point in trading this buy signal, as it formed during the ECB meeting and the release of important US data. There was a significant risk of strong and abrupt movements, which, in the end, did not materialize. However, trading in a flat market can be just as risky as volatile price swings. In addition, the signal itself was inaccurate and unconvincing.
COT report:
COT reports on the British pound also align perfectly with what’s happening in the market. According to the latest report on GBP/USD, the non-commercial group closed 700 long positions and opened 400 short ones. Thus, the net position of non-commercial traders decreased by another 1,100 contracts in a week. The net position indicator has been steadily rising over the past 12 months, but it has been firmly decreasing over the past two months. The British pound is also losing ground. We have been waiting for many months for the sterling to reverse downwards. Perhaps GBP/USD is at the very beginning of a prolonged downtrend. At least in the coming months, we do not see significant prospects for the pound to rise, and even if we’re currently witnessing a corrective phase, it could persist for several months.
The British pound has surged by a total of 2,800 pips from its absolute lows reached last year, which is an enormous increase. Without a strong downward correction, a further upward trend would be entirely illogical (if it is even planned). We don’t rule out an extension of an uptrend. We simply believe that a substantial correction is needed first, and then we should assess the factors supporting the US dollar and the British pound. A correction to the level of 1.1844 would be enough to establish a fair balance between the two currencies. The non-commercial group currently holds a total of 65,500 longs and 76,700 shorts. The bears have been holding the upper hand in recent months, and we believe this trend will continue in the near future.
Analysis of GBP/USD 1H
On the 1H chart, GBP/USD tried to form a new corrective wave, but it quickly ended near the level of 1.2269. Currently, the pair has dropped below the Ichimoku lines and the critical level of 1.2109. This suggests that the medium-term downtrend has started again. If, during the current upward retracement, the price does not rise above the Kijun-sen line, we can expect a new downward wave. Yesterday’s economic reports were expected to trigger a new downward movement.
As of October 27, we highlight the following important levels: 1.1760, 1.1874, 1.1927-1.1965, 1.2052, 1.2109, 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2520, 1.2605-1.2620, 1.2693. The Senkou Span B (1.2213) and Kijun-sen (1.2177) lines can also be sources of signals. Signals can be “bounces” and “breakouts” of these levels and lines. It is recommended to set the Stop Loss level to break-even when the price moves in the right direction by 20 pips. The Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. The illustration also includes support and resistance levels that can be used to lock in profits from trades.
On Friday, there are no significant events scheduled in the UK, and we only have a few minor reports in the US. We could expect low levels of volatility, but then again how much lower can it actually go? What’s ironic is that it might gradually increase today.
Description of the chart:
Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;
Yellow lines are trend lines, trend channels, and any other technical patterns;
Indicator 1 on the COT charts is the net position size for each category of traders;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.
The material has been provided by InstaForex Company – www.instaforex.com
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