The GBP/USD pair failed to overcome the support level of 1.2897 and, after rebounding from it, corrected to the critical Kijun-sen line on October 30. The descending channel has been rebuilt and is now supporting bearish traders again. The fact that the price failed to gain a foothold above the Kijun-sen line preserves excellent chances for the pair to resume the downward trend. Thus, the initiative remains in the hands of sellers, while buyers should continue to wait for the price to settle above the Senkou Span B line (and at the same time the descending channel). From a fundamental point of view and in our opinion, it is most preferable for the pound to fall.
GBP/USD 15M
The lower linear regression channel turned to the upside on the 15-minute timeframe, which indicates that a weak correction has begun on the hourly chart. However, it could have already ended near the critical line.
COT report
The latest Commitments of Traders (COT) report on the British pound showed that non-commercial traders were quite active in the period from October 20-26. However, their sentiment changed again, as can be seen from the green line of the first indicator in the chart. The mood of the "non-commercial" group of traders became more bullish for three consecutive weeks, but the net position decreased by 5,000 contracts over the last reporting week, so we can conclude that professional traders are again inclined to sell off the pound. However, if you look at the COT reports over the past few weeks or look at the first indicator, it becomes clear that commercial and non-commercial traders do not have a clear trading strategy right now. Perhaps this is due to an extremely unstable and complex fundamental background. The fact remains. The pound lost 90 points in recent trading days, and we believe that it will continue to fall. However, in the near future, we might receive important information about the progress of negotiations on the UK-EU trade deal, and the results of the vote for the US president will also become known. This information can change the mindset of professional traders. You need to be prepared for this.
The fundamental background for GBP/USD did not change on Friday. Traders were waiting for information about the course of talks in London, but did not wait for it. And, in principle, Great Britain did not provide any particularly important macroeconomic information on Friday. Minor reports on changes in personal income and spending for September were published in America, as well as the University of Michigan consumer confidence index for October. However, this information had no effect on the course of the auction. Britain will publish an index of business activity in the manufacturing sector on Monday, which has a fairly neutral forecast of 53.3. Perhaps some information will finally come in about how the next round of negotiations with the European Union went. And this information can cause a surge in activity for the pound/dollar pair. Well, do not forget that there will be Presidential Election Day in America tomorrow, so you also need to be prepared for increased volatility. Not the fact that we might face increased volatility, but it is possible. In general, the fundamental background remains extremely complex and confusing for the pound (especially with the introduction of a lockdown in England), but we are inclined to expect that quotes would fall further.
We have two trading ideas for November 2:
1) Buyers for the pound/dollar pair failed to settle above the Kijun-Sen line. Thus, the initiative remains in the hands of the bears, and long positions, accordingly, are irrelevant. You are advised to reconsider long deals in case the price settles above the Senkou Span B (1.3018) and Kijun-sen (1.2979) lines with the target of the resistance area of 1.3160 -1.3184. Take Profit in this case will be up to 110 points.
2) Sellers continue to pull down the pair and have reached the 1.2897 level, which they have not been able to overcome so far. Since a rebound followed from the Kijun-sen line, traders could already open new sell orders with targets at the 1.2897 level and the support area of 1.2854-1.2874. If these targets are overcome, then you are advised to trade down while aiming for the 1.2754 level. Take Profit in the first case will be 30-60 points, in the second - up to 80.
Hot 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 material has been provided by InstaForex Company - www.instaforex.com