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GBP/USD 15M
Both linear regression channels turned to the downside on the 15-minute timeframe. However, the downward movement is not that strong. Yesterday, the US dollar managed to win back around 80 points. Thus, a consolidation below and a rebound from the Kijun-sen line is good for the bears, but they are in no hurry to take advantage of the bulls' chances.
GBP/USD 1H
The GBP/USD pair resumed a slight downward movement on Thursday after rebounding from the critical Kijun-sen line. The strength of this downward movement eloquently reflects the mood of traders. Very few people still want to sell the pound and buy the dollar. Therefore, in general, an upward trend is still present on higher timeframes. There is still a descending channel on the hourly timeframe, which allows us to expect that the downward movement will continue by another 50-100 points. Such a decline in the pound already seems to be something quite extraordinary in the current environment. Although we still believe that the fundamental background is not on the pound's side and its growth in recent months is very difficult to explain. However, growth can be speculative. As we have mentioned, any hypothesis needs specific technical support. If they are not there, therefore, the hypothesis has not yet been confirmed. The most difficult thing in the current situation is to understand when the movement can increase, and when to change direction. As the foundation and macroeconomics continue to be ignored, we are deprived of a very powerful analytical tool.
COT report
The GBP/USD pair fell by 15 points during the last reporting week (December 22-28). Despite the fact that around 300 points were passed from low to high during these four trading days. Thus, first of all, we can conclude that the upward trend is still present for the pound. Secondly, there are minimal price changes. A new Commitment of Traders (COT) report showed that professional traders closed both Buy (longs) and Sell (shorts) contracts. In general, there are minimal changes in the number of open/closed contracts for large traders on the pound in recent months. During the reporting week, a group of non-commercial traders closed 1,640 Buy-contracts and 296 Sell-contracts. Thus, this group of traders became a little more bearish. We can clearly see what is happening among large traders through the two indicators in the chart. The first shows regular changes in the direction of movement of the green and red lines for at least four months. That is, to put it simply, professional traders cannot decide what to do in the long term. We are increasingly inclined to believe that it is not the pound that is getting more expensive, but that the dollar is getting cheaper. Thus, almost everything depends on the demand for the dollar, and not on the actions of large traders on the pound or euro. The second indicator shows that the net position has become bullish for professional traders, but has stopped growing. Thus, according to the latest COT report, we can conclude that non-commercial traders are not too eager for new purchases of the pound.
The fundamentals for the British currency have recently been extremely weak. The events in Washington cannot be called joyful either. Nevertheless, the dollar began to rise in price as soon as Donald Trump's supporters attempted to seize the Capitol and were immediately defeated by the special services. Thus, we still conclude that the entire foundation is ignored. The pair's movements from yesterday can in no way be connected with what is happening in the world. It is also impossible to make an unambiguous conclusion that the pound has slightly decreased due to the lockdown in the UK or the general negative fundamental background. The US ISM business activity index for the services sector was published, which exceeded the forecast values and reached 57.2, but when have the markets reacted to business activity?
No major events or reports scheduled in the UK on Friday. Important data will come out in the United States. We don't even want to draw the attention of traders to unemployment and wage rates. We suggest focusing exclusively on the NonFarm Payrolls indicator. If the markets trade based on the meaning of this report, then it would indeed be possible to conclude that the correlation between the foundation and the movements in the market is slowly returning. It is expected that the number of new jobs created outside the agricultural sector will be between 70-110,000. Thus, any reading below this range should cause the dollar to fall. Above is further strengthening.
We have two trading ideas for January 8:
1) Buyers for the pound/dollar pair refuse to let the bears go down further, but still the quotes may continue to sluggishly fall. Thus, if buyers manage to get the pair above the new descending channel, then we recommend buying the pound again while aiming for the resistance level of 1.3753. Take Profit in this case will be up to 90 points.
2) Sellers seem to have seized the initiative in the market, but so far they cannot form a clear downward trend, the price is constantly moving back up. Thus, we recommend selling the pound/dollar pair with targets at the support level of 1.3496 and the Senkou Span B line (1.3445) if the pair rebounds from the Kijun-sen line (1.3620) (again) or to keep the shorts open after the previous rebound from this line. Take Profit in this case can range from 40 to 90 points.
Forecast and trading signals for EUR/USD
Explanations for illustrations:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the "non-commercial" group.
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