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GBP/USD – 1H.
According to the hourly chart, the quotes of the GBP/USD pair have consolidated under the corrective level of 161.8% (1.2789), which now allows us to continue falling in the direction of the next Fibo level of 200.0% (1.2625). A downward trend corridor characterizes the current mood of traders as "bearish". The Briton has faced a new dose of negativity in the past few days. Perhaps the saddest news is about the second wave of the coronavirus epidemic, which was officially announced a few days ago by Prime Minister Boris Johnson. The UK authorities will soon introduce new quarantine restrictions, possibly even a "hard" quarantine, as the number of cases has almost reached spring levels. Also, yesterday, there was a speech by the Governor of the Bank of England, Andrew Bailey, who said that in the coming months, the regulator is not going to introduce negative rates. This news was quite positive, and the pound even rose slightly on it. However, bear traders quickly recovered and did not allow the bulls to take the initiative. Traders do not believe that the Bank of England will not accept new monetary policy easing. The program for buying assets from the open market is also likely to be expanded. One way or another, the Bank of England will have to stimulate the economy, which again comes under a hail of blows, starting with a new wave of the epidemic and ending with the absence of a Brexit agreement with the European Union.
GBP/USD – 4H.
On the 4-hour chart, the GBP/USD pair performed a reversal in favor of the US currency, falling to the corrective level of 61.8% (1.2720). Closing the pair's rate below this level will work in favor of continuing the fall towards the next corrective level of 76.4% (1.2543). The downward trend corridor supports bear traders on the 4-hour chart as well. Closing the pair's rate above it will allow us to count on some growth.
GBP/USD – Daily.
On the daily chart, the pair's quotes returned to the corrective level of 76.4% (1.2776) and fixed below it. On this chart, traders can now expect a drop in quotes in the direction of the corrective level of 61.8% (1.2516).
GBP/USD – Weekly.
On the weekly chart, the pound/dollar pair closed under the lower downward trend line, thus, a false breakout of this line followed earlier. The pair returns to a downward trend.
Overview of fundamentals:
On Tuesday, the heads of the central banks of the UK and America gave speeches. Andrew Bailey provided a little support for the pound, however, he could not change the mood of investors dramatically.
News calendar for the US and UK:
UK - manufacturing PMI (08:30 GMT).
UK - services PMI (08:30 GMT).
US - index of business activity in the manufacturing sector (13:45 GMT).
US - PMI for the services sector (13:45 GMT).
US - Federal Reserve Board of Governors Chairman Jerome Powell will deliver a speech (14:00 GMT).
On September 23, the UK and the US will release indices of business activity in the service and manufacturing sectors. These are not the most important reports at this time.
COT (Commitments of Traders) report:
The latest COT report on the British pound, released last Friday, turned out to be much more logical than the previous one. This time, the report showed that the "Non-commercial" group reduced the number of long contracts on its hands by 4,547 units and opened 7,013 short contracts. Thus, the mood of the most important group (the group of professional speculators) became more "bearish" during the reporting week. Given that the British pound has fallen by 700 points since September 1, this behavior of the "Non-commercial" group is logical. The "Commercial" group (hedgers) managed to close about 80 thousand contracts during the reporting week, in equal shares of short and long. For comparison, 80 thousand contracts are more than the total number of contracts currently in the hands of speculators. Thus, the attractiveness of the British in the eyes of major traders begins to decline, and quite strongly.
Forecast for GBP/USD and recommendations for traders:
I recommend selling the British currency with a target of 1.2625, as it was closed at the level of 161.8% (1.2789) on the hourly chart. I do not recommend opening purchases of the British currency until the quotes are fixed above the downward trend corridor on the hourly chart.
Terms:
"Non-commercial" - major market players: banks, hedge funds, investment funds, private, large investors.
"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy currency, not for speculative profit, but for current activities or export-import operations.
"Non-reportable positions" - small traders who do not have a significant impact on the price.
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