GBP/USD - 24H.
The GBP/USD currency pair fell by 120 points this week, although it stood in one place for most of the week. In the first half of this week, it was still possible that the pound fell ill with the "euro disease," which is expressed in the strongest drop in volatility in the last six months or a year. The pound/dollar pair has moved quite actively from time to time. However, we recall that 100-130 points per day are considered normal volatility for it. At the end of this week, the pound still cheered up and began to show at least an "average" value of volatility. What is noteworthy is that both major pairs moved almost identically on Thursday and Friday. Thus, the conclusion is obvious: the reasons for the strengthening of the dollar and the fall of the euro and the pound lie precisely in the United States. And to be more precise, the Fed. In this week's last two trading days, one important report was published in the UK and the States. Both of them published data on retail trade. These reports are quite important. However, they could hardly provoke a 110-point rise in the dollar.
Moreover, on Friday, the pair's downward movement resumed only in the American trading session, and the report on retail sales in Britain was released early in the morning. Thus, we believe that the reasons for the dollar's growth lie solely in the positive expectations of the markets regarding the curtailment of the quantitative stimulus program in September. The Fed meeting will be held next week, and many experts and representatives of the FOMC said that they are waiting for an early announcement of the end of QE. It is this factor that can support the dollar at this time. The question is, how long will it support the demand for the dollar, and will the Fed itself be disappointed on Wednesday?
COT report.
During the last reporting week (September 7 - 13), the GBP/USD pair did not add or lose a single point. Recall that in recent weeks, according to COT reports, the mood of major players has changed to bearish. The green line of the first indicator in the illustration above (indicates a change in the "Non-commercial" group) fell below the zero levels. It was the case until the last COT report, which was released on Friday, September 17. At that time, we already questioned the continuation of the fall of the British currency. Simply because the pound, like the euro, has been correcting for more than six months against the global upward trend. And during this time, it managed to adjust by 23.6%. It is minimal and certainly does not look like the formation of a new downward trend. And the latest COT report showed that any expectations of further growth of the dollar might be premature. Although the dollar rose against both the pound and the euro at the end of the week, major players immediately opened 15 thousand contracts to purchase the pound and closed the same number of contracts for sale. The net position for the "Non-commercial" group of traders increased by 30 thousand at once. Considering that only 30 thousand purchase contracts were opened for professional traders until the last COT report, such changes are global. Thus, in the pound, the chances of a further fall are much less than with the euro. Moreover, both the pound and the euro adjusted against the upward trend by 600 points. But for the pound, it is less than 23%, and it is about a third for the euro.
There were quite many statistics in the UK during the current week, but again it is difficult to conclude that it had a strong impact on the pair's movement. The data on unemployment and wages, which were published on Tuesday, was not ignored. The inflation report on Wednesday did not interest traders too much. However, even if we talk about statistics on Tuesday, the market reaction was 50 points of growth. And later in the evening, the British currency already fell for no reason. Friday's statistics on British sales were completely ignored on closer inspection, and the pound fell even without this weak report, but already in the afternoon. Thus, the markets reacted very selectively to macroeconomic statistics, clearly keeping the upcoming Fed meeting in mind.
Trading plan for the week of September 20-24:
1) The pound/dollar pair has not been able to gain a foothold above the Ichimoku cloud, so the downward trend continues. We remind you that the critical level of the pound is now 1.3600. It was near it that all previous corrections against the global upward trend ended. Therefore, considering the consolidation of quotes below the Kijun-sen line, it is now possible to sell the pair. The goal is 1.3600. If this level is overcome, the chances of a further fall in the pound will increase, but strong changes in the mood of major players suggest that the pair's growth may resume in the near future.
2) The bears continue to hold the initiative in their hands. Therefore, it will be possible to consider purchases again no earlier than the price is fixed back above the critical line. However, pay attention to the Bollinger bands, which have recently been directed more sideways than downwards. And its lower band also passes near the level of 1.3600. Therefore, we still do not expect a strong drop in the pair, but at the same time, we note that there are no signals for growth now.
Explanations to the illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. Take Profit levels can be placed near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced earlier.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.
