Analysis of GBP/USD 24-hour TF.
The GBP/USD currency pair has increased by 150 points during the current week. Although this week's status was festive, the market still found grounds for fairly strong purchases of the British currency, although these grounds were not obvious to most traders. By and large, these grounds had to be sought out, and nothing came to mind. The only two possible options are the absence of a "lockdown" before Christmas, as stated by Boris Johnson, and the technical factor. Let's analyze both in more detail. Earlier this week, the British Prime Minister announced that despite the increase in the number of cases of omicron, strict quarantine will not be introduced in the country, at least until Christmas. If Boris Johnson were a patriarch, he would never introduce a "lockdown" at all, since he hurts the UK economy (like any other country). However, there is still a Parliament, and many deputies in it believe that tightening quarantine measures is vital. The fact is that omicron may not be as dangerous as other strains, but it is much more contagious. More people get sick with it and in absolute terms, there may be even more hospitalizations than from Delta. However, Boris Johnson is already afraid to talk about "lockdown", since last winter, just at Christmas, a "lockdown" was already introduced in Britain, and recently it became known that during it Boris Johnson and about 50 other members of Parliament had fun at a government party. The second factor (technical) suggests that the pair bounced from a very strong Fibonacci level of 38.2% - 1.3162 on a 24-hour timeframe. Thus, the probability of at least a corrective movement was very strong, as we discussed in the last week's articles. And the British currency still does not have fundamental growth factors.
Analysis of the COT report.
During the last reporting week (December 13-17), the mood of professional traders was much more "bearish". Professional traders closed 6.7 thousand contracts for sale and 20.1 thousand contracts for purchase during the week. Thus, the net position for the "Non-commercial" group of traders decreased by 13.4 thousand contracts, which is a lot for the pound. Thus, unlike the euro currency, the pound sterling, according to COT reports, continues to fall quite reasonably: major players continue to sell it. However, the green and red lines of the first indicator (which mean the net positions of the "Non-commercial" and "Commercial" groups) have already moved far away from each other. Recall that such a deletion signals the imminent end of the trend. However, as with any fundamental assumptions, specific technical signals are required to work out this hypothesis, which is not currently available. If we do not take into account the increase in the key rate by the Bank of England, then there are no special fundamental reasons for the growth of the pound now either. Recall that Boris Johnson continues to get into various scandals in the UK and there is already talk that he will leave his post before the end of the deadline. The pandemic in the UK is gaining momentum and the other day an anti-record was set for the daily number of infections. Omicron is also spreading quite rapidly across the country, creating additional risks for the healthcare system and the economy. London, on the other hand, cannot find a common language with Paris and Brussels, which threatens it with the deterioration of relations with its closest neighbors and the loss of markets for the sale of products. The new COT report was not released on Friday. We expect it at the beginning of the new week.
Analysis of fundamental events.
In the UK, a report on GDP for the third quarter was released this week, which turned out to be weaker than forecasts. And in the US, a report on GDP for the third quarter was released, which turned out to be stronger than forecasts. Therefore, it would be more logical for the dollar to rise, and not vice versa. The US also released an indicator of consumer confidence for December, which also grew stronger than expected. Orders for durable goods are better than forecasts. The consumer sentiment index from the University of Michigan is better than forecasts. The change in the levels of spending and income of the American population is at the level of forecasts. It turns out that all the statistics from overseas were strong. But the euro/dollar has been standing still all week, and the pound/dollar has been growing. Therefore, there was no reaction to these not the most important reports.
Trading plan for the week of December 27-31:
1) The pound/dollar pair maintains a downward trend, although the price has fixed above the critical line this week. Therefore, purchases can now begin to be considered slowly. As we said earlier, the pound sterling may well rise in price by 400-500 points in the coming weeks. Moreover, it did not react too much to the festive status of the last days. The nearest target is the Senkou Span B line.
2) The bears let the initiative out of their hands this week. Now it will be possible to consider selling the pair again no earlier than fixing the pair below the Kijun-sen line. And even in this case, you need to be careful with the level of 1.3162, from which prices bounced at least 4 times.
Explanations to the illustrations:
Price levels of support and resistance (resistance /support), Fibonacci levels - target levels when opening purchases or sales. Take Profit levels can be placed near them.
Ichimoku indicators (standard settings), Bollinger Bands (standard settings), MACD (5, 34, 5).
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.
