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GBP/USD – 1H.
According to the hourly chart, the quotes of the GBP/USD pair performed a reversal in favor of the US currency yesterday, consolidating under the upward trend line and falling to the corrective level of 61.8% (1.2879). The euro and the pound simultaneously began the process of falling after it became known that negotiations on a new financial aid package between Democrats and Republicans were terminated. This was stated by Donald Trump himself. However, traders reacted very phlegmatically to Jerome Powell's speech. The Fed chairman reiterated that without a new fiscal stimulus package, the US economy will show a slower pace of recovery and called on Congress to approve the package (first Powell's speech, and then Trump's decision). Powell also said that he is not going to introduce negative rates. Thus, nothing fundamentally new was heard. The same goes for the speech of Christine Lagarde, who also said that the economic recovery may be slow, however, she cited the second "wave" of coronavirus in Europe as the reason. At the same time, Lagarde just allowed the possibility of lowering the rate even more, even though it is already at the level of -0.5%. The ECB president said that she will do everything necessary to stimulate the economy and inflation, which has also fallen very low recently.
GBP/USD – 4H.
On the 4-hour chart, the GBP/USD pair rose to the corrective level of 38.2% (1.3010) and rebounded from it with a reversal in favor of the US currency and a fall to the corrective level of 50.0% (1.2867). The pair's rebound from this level will allow traders to expect a reversal in favor of the British dollar and a resumption of growth towards the level of 38.2%. Fixing quotes at 50.0% will increase the probability of continuing to fall in the direction of the Fibo level of 61.8% (1.2720). A bullish divergence is brewing in the CCI indicator, which may increase the probability of a rebound from the level of 50.0%.
GBP/USD – Daily.
On the daily chart, the pair's quotes performed a rebound from the corrective level of 61.8% (1.2709) and an increase to the Fibo level of 76.4% (1.3016). Near this level, a reversal was made in favor of the US currency and the process of falling towards the corrective level of 61.8% began.
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 UK released the index of business activity in the construction sector, which rose from 54 to 56.8 points. However, neither this report nor the performance of Jerome Powell saved the British from falling by 110 points.
News calendar for the US and the UK:
US - publication of the minutes of the Fed meeting (18:00 GMT).
On October 7, the EU and US calendars are almost empty. Traders can only pay attention to the publication of the FOMC protocol late in the evening. However, there may be new messages from Donald Trump. They seem to be the ones that traders are most interested in right now.
COT (Commitments of Traders) report:
The latest COT report on the British pound that was released last Friday showed a sharp increase in the number of short contracts in the "Non-commercial" category. This means that this group of traders believes that the British pound will continue to fall, although it has been growing in recent days. Now the total number of short contracts focused on the hands of speculators exceeds the total number of long contracts. Thus, we can conclude that major traders are again changing their mood to "bearish". In total, during the reporting week, all categories of traders opened approximately the same number of contracts.
Forecast for GBP/USD and recommendations for traders:
Today I recommend buying the GBP/USD pair with a target of 1.3010 if the rebound from the corrective level of 50.0% (1.2867) is made on the 4-hour chart. Fixing quotes below this level will allow you to open sales with a target of 1.2720.
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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