GBP/USD 1H
The GBP/USD pair continued to trade in its own style on Tuesday, October 20 - in different directions. Therefore, it is still very difficult to say what kind of trend has developed for the pound/dollar pair. We have slightly rebuilt the descending trend line, which now signals a downward trend again. However, this trend line is no longer strong, and the pair, as we can see, rebounded from the resistance area of 1.3006-1.3024 in the first place. Thus, we believe that there are still good chances of continuing the downward movement. And from a fundamental point of view, these chances are quite high. Nevertheless, if buyers manage to gain a foothold above the 1.3006-1.3024 area and the trend line, then chances of a new upward trend will increase many times over.
GBP/USD 15M
Both linear regression channels are more sideways than up or down on the 15-minute timeframe. Such an arrangement perfectly reflects the nature of the pair's movement on the hourly chart.
COT report
The latest Commitments of Traders (COT) report on the pound showed that from October 6-12, non-commercial traders continued to mostly close contracts for the British currency, rather than open new ones. The pound sterling increased by around 60 points during this period, which is very small, despite the rather volatile trading within each individual day. During this time, the "non-commercial" group of traders opened 149 Buy-contracts (longs) and closed 6,144 Sell-contracts (shorts). Thus, the net position of professional traders has grown again, by 6,000 contracts. However, as with price changes, these changes in the mindset of professional traders are purely formal. Moreover, the net position of non-commercial traders is growing for the third consecutive week, which casts doubt on the pound's succeeding decline, which is much more expected than growth. Even more interesting is the fact that the total number of contracts for the "non-commercial" group has been decreasing in recent months. That is, large traders do not believe in the pound and do not want to deal with it, whether it is about buying or selling it. The same case with the "commercial" group, which also mainly closes any contracts for the pound. In such circumstances, we would not make a long-term forecast based on the COT report.
No important information from the UK on Tuesday. Traders could focus on the ever-worsening numbers of COVID-19 spreading in Great Britain. The numbers are really scary, but they are not the highest among the EU countries. We would say the values are "average", but this spring the British healthcare system has been unable to cope with a much smaller influx of patients. Plus, the more the number of cases becomes, the more likely it is that Prime Minister Boris Johnson will introduce total quarantine. In principle, this applies to almost any country. If the healthcare system cannot cope, then a total lockdown will have to be introduced. The UK is slated to publish the September CPI on Wednesday. Inflation is expected to accelerate to 0.6% y/y, although this figure is still very low. No more important events are planned either in the United States or in Britain, however, it is possible that new important data on Brexit topics, negotiations between London and Brussels, negotiations between Democrats and Republicans on a new stimulus package for the US economy are possible.
We have two trading ideas for October 21:
1) Buyers for the pound/dollar pair met an insurmountable obstacle on their way in the form of 1.3006-1.3024 and rebounded from it. Therefore, you can consider long positions while aiming for 1.3173, if this area is overcome, not earlier. Take Profit in this case will be up to 100 points. However, take note of very frequent changes in the direction of movement and relatively high volatility, so we recommend trading in small lots.
2) Sellers could not keep the pair below the downward trend line, however, this line is now rebuilt, and the bulls have not yet managed to gain a foothold above 1.3006-1.3024. Therefore, we recommend taking new sell positions below the Kijun-sen (1.2963) and Senkou Span B (1.2962) lines, and aiming for the support area of 1.2857-1.2872 and the 1.2823 level. Take Profit in this case can range from 60 to 100 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.
