GBP/USD 24H.
The GBP/USD currency pair has fallen by 200 points over the past week, although the fall could have been much stronger. On the other hand, given the general reluctance of markets to buy the US currency, such a fall is also a blessing. We have been expecting a fall in the pound for a long time, and the only reason for this expectation is that there was no trade deal on Brexit. And in such conditions, it was very strange to observe the strengthening of the pound. However, the fall has started, although it is not yet strong. From a technical point of view, the price went below the critical Kijun-sen line, which opens up certain prospects for bears. At the same time, everything will depend solely on the traders themselves and the major market players. The fact is that the deal looked "fantastic" from the very beginning. And we have been writing about this since March, the month when the negotiations started. So nothing has fundamentally changed since then. Yes, the pound has been growing for several months due to the "four types of crisis" in the US. But there is no denying that the UK economy is in no less bad shape than the US. Thus, we are still waiting for a global fall in the British currency.
COT report.
During the last reporting week (December 1-7), the GBP/USD pair increased by 60 points. Although according to the latest COT report, this growth, on the contrary, is quite justified. During the reporting week, a group of non-commercial traders opened 2,866 new buy contracts and closed 9,189 sell contracts. Thus, the net position for non-commercial traders increased by 12 thousand contracts, which is very much for the British pound, given that the total number of contracts for the "Non-commercial" group is approximately 90 thousand. Thus, the mood of professional traders became sharply more "bullish", and the total number of contracts decreased. This suggests that there is still a very small number of major players who want to deal with the British currency at all. As for the indicators, they have been showing the absence of any trend for several months. In other words, professional traders do not increase purchases or sales in the long run. Thus, it is still impossible to draw long-term conclusions based on COT reports.
The fundamental background for the GBP/USD pair remained unchanged. During the week, it became known that the UK and the EU resumed negotiations and set the next deadline - December 13, that is, today. However, the resurrection has come, and no positive information has been received. It became known only that the parties did not manage to come closer to an agreement. There has probably been no progress on fishing, government support, and fair competition, as well as dispute resolution. Therefore, there is no reason for the pound to become more expensive. But there are new reasons to get cheaper. First, the pound remains overbought. Secondly, it has been getting more expensive since March. Third, the fundamental background puts pressure on it. Well, all the other news and macroeconomic statistics do not matter now. An important factor is the price rebound from the level of 1.3481, which is the previous local maximum. Traders failed to get the pair through this level, so this is an additional reason for the pound to fall. Thus, we believe that the pound will continue to fall this week. Although everything will depend again on the traders themselves. If they resume buying the pound for some reason known to them, nothing can be done about it, and this currency will continue to strengthen. You should also wait for official information from Michel Barnier and David Frost, who will have to make a summary: will the negotiations continue at all, or is there a fat point in this story? We still believe that negotiations will continue in one form or another for the entire year 2021. The question is, how will it be arranged?
Trading plan for the week of December 14-18:
1) Since the price is fixed below the critical line, further upward movement is now in question. But at the same time, we cannot say that the upward trend has ended. Thus, if the pound/dollar pair returns to the area above the critical line, we will be forced to state the resumption of the upward movement with the targets of the resistance levels of 1.3526 and 1.3734.
2) Sellers are still quite weak. The first steps towards a new downward trend have been made, but much still depends on the fundamental background and the reaction (or lack thereof) to it. In the 4-hour timeframe, the downward trend has already been formed, however, it is quite unstable and unconvincing. Markets continue to be quite nervous about the deal, negotiations, and the future of the British economy. Therefore, now the auction is "stormy".
Explanation of the illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger bands, MACD.
Support and resistance areas – areas that the price has repeatedly bounced from before.
Indicator 1 on the COT charts – shows the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.
