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GBP/USD – 1H.
According to the hourly chart, the GBP/USD pair performed a reversal in favor of the US currency and a slight drop in the direction of the corrective level of 61.8% (1.3722). However, just two hours ago, the quotes turned up and began the process of growth. All these movements occur within an upward trend corridor, which keeps traders' moods bullish. Thus, the fall of the British today could be caused by technical reasons. However, at the same time, when the fall began in the UK, the consumer price index for September was published, which amounted to 3.1% y/y, although traders expected that it would not change compared to August and would be 3.2% y/y. The monthly price increase was also lower - only 0.3%. Traders expected at least 0.4% m/m. Thus, despite all the concerns of representatives of the Bank of England and Governor Andrew Bailey personally, inflation in the UK is not growing at a very high rate. However, a decrease of 0.1% y/y also cannot be considered the beginning of the process of slowing inflation.
This value is only for one month. Therefore, by the end of this year or the beginning of the next, the consumer price index may still accelerate to 4% or higher. However, until this happens, the likelihood of the British quantitative easing program being curtailed is even more questionable than the curtailment of the Fed's QE program. In both the US and the UK, much depends on inflation. Stimulus programs are aimed at accelerating the economy as much as possible. However, at the same time, central banks need to monitor inflationary pressure so that it does not exceed the target limits in the long term. It is exactly what Andrew Bailey was talking about just the other day. The governor said that a further increase in inflation would force the central bank to use its tools to curb price growth. But if there is no inflation growth itself, then there is no reason to curtail QE in the near future since this will also lead to a slowdown in the economy. The pound fell today, based on these reflections. Another thing is that it was only a fall inside the ascending corridor.
GBP/USD – 4H.
The GBP/USD pair on the 4-hour chart performed a rebound from the upper limit of the corridor and a reversal in favor of the US currency. Thus, the process of falling quotes may continue for some time in the direction of the lower boundary of the corridor. A rebound from this boundary will allow us to expect a resumption of growth in the direction of the Fibo level of 23.6% (1.3870). Emerging divergences are not observed in any indicator today.
News calendar for the USA and the UK:
UK - consumer price index (06:00 UTC).
US - FOMC member Charles Evans will deliver a speech (16:00 UTC).
US - FOMC member Rafael Bostic will deliver a speech (16:00 UTC).
US - FOMC member Randal Quarles will deliver a speech (17:00 UTC).
On Wednesday, an inflation report was already released in the UK, which caused the pound's fall. In the afternoon, FOMC representatives will make speeches. However, they are unlikely to please traders with new information that differs from what was already heard yesterday from other FOMC members.
COT (Commitments of Traders) report:
The latest COT report from October 12 on the pound showed that the mood of the major players had become much more "bullish." In the reporting week, speculators closed 1,700 long contracts and 10,673 short contracts. Thus, the "bearish" mood has become much weaker. Nevertheless, the number of short contracts concentrated in the hands of speculators still exceeds the number of long contracts by 11 thousand. It still indicates a fairly strong "bearish" mood. Thus, we can expect a resumption of the fall of the British dollar in the near future. However, the current growth of the British dollar corresponds to the actions of speculators in the last week. And both upward trend corridors support the further growth of the British dollar.
GBP/USD forecast and recommendations to traders:
I recommend buying the pound when rebounding from the level of 61.8% (1.3722) or the lower boundary of the corridor on the hourly chart with targets of 1.3795 and 1.3913. I recommend opening sales if there is closure under the ascending corridor on the hourly chart with targets of 1.3603 and 1.3530.
Terms:
"Non-commercial" - major market players: banks, hedge funds, investment funds, private, large investors.
"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy foreign currency not to make speculative profits, but to ensure 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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