GBP/USD – 1H.
According to the hourly chart, the quotes of the GBP/USD pair have been trading between the corrective levels of 50.0% (1.2840) and 61.8% (1.2879) for the last two days. There were several attempts to gain a foothold outside this range, however, all of them were unsuccessful. The problem is that traders now do not understand what to do with the British currency. In the UK, the last stage of negotiations on a deal with the European Union began yesterday, in which Michael Gove (a member of the British Cabinet) and Maros Sefcovic (Vice-President of the European Commission) are already personally participating. That is negotiations at the highest level. Sefcovic warned a few days ago that London must comply with the Brexit agreement from last year, namely the protocol on the Northern Ireland border. Further, any violation of it will result in big problems for London. At the same time, any further negotiations with London will be greatly complicated. Moreover, on the same day (yesterday), the British Parliament voted for the controversial bill and they passed it. The Lower House approved the bill by 340 votes. The document will now be sent to the House of Lords, which can make changes and return it to the House of Commons for a vote. It is expected that the final vote will not take place until December when it will be known exactly about the future relationship between Britain and the European Union. In other words, Britain seems to be allowing itself to disobey the Northern Ireland protocol if it fails to reach a free trade agreement with the European Union. And if there is no agreement that London needs, then it is not necessary to implement other agreements with the EU. This seems to be the logic of Boris Johnson and his government.
GBP/USD – 4H.
On the 4-hour chart, the GBP/USD pair performed an increase to the corrective level of 50.0% (1.2867). The rebound of quotes from this level will allow traders to count on a reversal in favor of the US currency and a slight drop in the direction of the corrective level of 61.8% (1.2720). Bearish divergence in the MACD indicator increases the probability of resuming the fall of quotes, although the pair was fixed above the descending corridor just a few days ago. Thus, the mood of traders changed to "bullish".
GBP/USD – Daily.
On the daily chart, the pair's quotes performed a reversal in favor of the British and fixed above the corrective level of the Fibo 76.4% (1.2776). Thus, the growth process can be continued in the direction of the corrective level of 100.0% (1.3199). However, further growth will depend on the consolidation of quotes above the level of 1.2867.
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:
There were no major economic reports in the UK on Tuesday. All the attention of traders is now on the negotiations between Brussels and London.
The economic calendar for the US and the UK:
UK - change in GDP (06:00 GMT).
US - change in the number of employees from ADP (12:15 GMT).
US - change in GDP for the quarter (12:30 GMT).
On September 30, the second-quarter GDP report was released in the UK, which was slightly better than traders expected (-19.8% q/q. Even today, quite important reports will be released in the United States.
COT (Commitments of Traders) report:
The latest COT report on the pound that was released last Friday turned out to be boring and uninteresting. The "Non-commercial" group of traders closed approximately 2,000 long and short contracts in the reporting week, thus, its mood has not changed much. Other groups have less influence on the market. However, I note the fact that both the "Non-commercial" group and the "Commercial" group now have almost complete equality in the volumes of long and short contracts. Even the total number of currently open contracts for all groups in the market is almost equal. This rarely happens. The last report generally does not allow me to draw any important conclusions about future possible changes.
Forecast for GBP/USD and recommendations for traders:
I recommend selling the British currency with a target of 1.2720 if there is a rebound from the level of 50.0% (1.2867) on the 4-hour chart (especially with the formation of a bearish divergence). I recommend opening purchases of the British dollar after fixing above the level of 50.0% (1.2867) with the goal of 1.3010.
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.
