Analysis of GBP/USD 24-hour TF.
The GBP/USD currency pair continued its steady decline during the current week. The quotes of the British currency dropped another 100 points and updated the annual lows. Thus, the technical picture for the pound/dollar has not changed this week either. The pair had the same effect on both major pairs, but at the same time, the European currency remained within the upward correction, and the pound continued to fall. And it's pretty weird. Especially judging by Friday, when the European currency again rose slightly, and the pound sterling fell by another 65 points, although there were few important events in the European Union and the UK that day. Almost all of the market's attention was focused on American statistics. But the euro and the pound moved differently. Of course, the British currency may be under pressure now because of everything that is happening in the UK itself. Recall that negotiations on the "Northern Ireland protocol" are at an impasse, and Boris Johnson managed to quarrel with French President Emmanuel Macron and, as political analysts note, there have not been such bad relations between the two countries since Waterloo. But at the same time, markets do not always work out political factors, and in terms of the economy in the UK now everything is no worse than in the EU. In general, the pound remains the currency that moves as ambiguously as possible. There are a huge number of factors that can influence its movements and it is very difficult to understand which of them the markets take into account and which ones do not. In general, the price continues to move towards the 38.2% Fibonacci level. And near this level, it can stop at least for a short time. Or it may bounce back, completing the entire downward movement of 2021. A lot will now depend on the meetings of the Bank of England and the Fed in December.
Analysis of the COT report.
During the last reporting week (November 29 - December 3), the mood of professional traders became a little more "bearish". In principle, quite unexpectedly, the bears became almost twice as strong as the bulls. Recall that since about August, the bulls and bears could not decide who to dominate the market. This is seen by the two indicators in the illustration above: the net position of the "Non-commercial" group was constantly jumping from side to side. However, in the last few weeks, professional traders have increased the number of shorts to 93 thousand, and the number of longs has remained at 51 thousand. Thus, at this time, the mood can be described as "bearish". Consequently, the pound sterling can be concluded that the fall of the pound will continue. However, as always, it does not do without one "but". The red and green lines of the first indicator, which indicate the net positions of commercial and non-commercial traders, the two most important and large groups, have moved quite far from each other. They were at about the same distance in May-June, when the upward trend ended. And a strong distance from each other of these two lines just means that the trend may end. Of course, if the demand for the dollar does not decline, and there is still the same negative fundamental background in the UK, then nothing will prevent the US currency from continuing to grow. However, a further fall in the pound will mean that the number of shorts will continue to grow. And it already exceeds the number of longs by almost 2 times.
Analysis of fundamental events.
In the UK this week, there was absolutely nothing interesting in macroeconomic terms. Two reports on business activity in the service and manufacturing sectors, which in principle are not very important, turned out to be as neutral as possible. Therefore, only American statistics and events had an impact. And on Friday, the pound fell by weak statistics due to the ocean at the same time when the euro currency has grown. Of course, in addition to Non-Farms, we can also note the ISM report for the service sector, which grew to a record 69.1 points, significantly exceeding forecasts. We can also note the unemployment rate, which has fallen to 4.2%. However, then why was the dollar paired with the European currency trading lower? In general, it is impossible even to say unequivocally exactly how the markets reacted to the macroeconomic data from America on Friday.
Trading plan for the week of December 6-10:
1) The pound/dollar pair continues its steady decline. Therefore, purchases are now impractical. To do this, you need to wait until the pair is fixed above the critical line, or better - above the Ichimoku cloud. Since the price is now very far from these lines, it is unlikely that this will happen in the near future. On a lower timeframe, the pair may change the downward trend to an upward one, which may be the beginning of a round of upward movement on the 24-hour TF. We assume that the pair may go up 400-500 points in the next month or two. But so far there are no signals about the beginning of such a movement. And without technical signals, it is not recommended to open purchase transactions.
2) The bears managed to keep the pair below the Ichimoku cloud and now continue to develop their success. The targets for further movement to the south are now 1.3162 (38.2% Fibonacci) and the support level of 1.3094. A rebound from any of these levels can provoke, at least, an upward pullback.
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.