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Forex Analysis & Reviews: Forecast and trading signals for GBP/USD for October 7. COT report. Detailed analysis of the pair's movement and trade deals. The British pound could drop even lower on Friday.
time 07.10.2022 06:51 AM
time Relevance up to, 08.10.2022 02:06 AM

GBP/USD 5M

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The GBP/USD currency pair also continued its downward movement on Thursday and consolidated below the critical line. Thus, the euro and the pound again traded almost identically, which no longer surprises anyone. The only difference is that the pound managed to rise by 1100 points in recent weeks, but before that it had fallen by the same amount. So the status quo has been restored. Only the index of business activity in the UK construction sector can be distinguished among the macroeconomic statistics on Thursday, but it is unlikely that it was the reason for the pound's fall by 250 points from the high of the day. The pair remains above the important Senkou Span B line on the hourly timeframe, and above the critical Kijun-sen line on the 24-hour timeframe. Therefore, at the moment, it retains good chances for the resumption of the upward movement, followed by the formation of a global upward trend. However, strong Nonfarms on Friday and the general negative geopolitical background may return the bears to the market, and the pair to its absolute lows. From a technical point of view, the probability of the end of the global downward trend is high, but geopolitics can ruin everything.

In regards to Thursday's trading signals, everything was fine. Two good sell signals were formed at the beginning of the European trading session, which should be worked out. In the future, the Kijun-sen line could spoil everything, but the fall still continued and ended much below the level of 1.1212. Therefore, traders could get at least 145 points of profit on the second short position. The first one closed at breakeven by Stop Loss.

COT report:

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The latest Commitment of Traders (COT) report on the British pound was again very eloquent. During the week, the non-commercial group opened 18,500 long positions and 10,100 short positions. Thus, the net position of non-commercial traders increased by another 8,400, which is quite a lot for the pound. We could assume that the actions of the big players and the pound's movement have finally begun to coincide, only the report is released with a three-day delay and simply does not include the last three days of trading, when the pound showed growth. The net position indicator has been actively falling again in recent weeks, and the mood of the big players remains "pronounced bearish", which is clearly seen in the second indicator in the chart above (purple bars below zero = bearish mood). Now it has begun a new growth, so the British pound can formally count on growth. But, if we recall the situation with the euro, then there are big doubts that based on the COT reports, we can expect a strong growth of the pair. How can you count on it if the market buys the dollar more than the pound? The non-commercial group now has a total of 106,000 shorts and 59,000 longs open. The difference, as we can see, is still large. The euro cannot show growth if the major players are bullish, and the pound will suddenly be able to grow if the mood is bearish? We remain skeptical about the long-term growth of the British currency.

We recommend to familiarize yourself with:

Overview of the EUR/USD pair. October 7. The European Union has introduced the eighth package of sanctions against the Russian Federation. We are waiting for a new fall of the euro?

Overview of the GBP/USD pair. October 7. Moscow is ready to resume gas supplies via the surviving Nord Stream line, Germany is against it.

Forecast and trading signals for EUR/USD on October 7. Detailed analysis of the movement of the pair and trading transactions.

GBP/USD 1H

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The pound/dollar pair rolled back down by 350 points on the hourly timeframe, but at the same time maintains an upward trend. Unfortunately, in the long term, the downward trend may well resume, as the Senkou Span B line of the Ichimoku indicator on the 24-hour timeframe is above the price and can provide strong resistance to it. Nevertheless, the chances that the downward trend is still completed are very high, but now it is vital for the pound to stay above the critical line on the 24-hour timeframe. If geopolitics does not spoil everything, the pound may show growth for a long period of time. We highlight the following important levels on October 7: 1.0538, 1.0930, 1.1212, 1.1354, 1.1442, 1.1649. Senkou Span B (1.0905) and Kijun-sen (1.1258) lines can also be sources of signals. Signals can be "rebounds" and "breakthroughs" of these levels and lines. The Stop Loss level is recommended to be set to breakeven when the price passes in the right direction by 20 points. Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. The chart also contains support and resistance levels that can be used to take profits on trades. No important events are scheduled for Friday in the UK, while the most important reports on unemployment and Nonfarm will be released in the US. A reaction to them must follow and could turn out to be very strong.

Explanations for the chart:

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.

Paolo Greco,
Analytical expert of InstaForex
© 2007-2023
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