GBP/USD 1H
The GBP/USD pair quickly and sharply recovered all the losses of the previous day on October 14. Thus, the pair passed a total of 400 points during the last two trading days. This is a very high volatility even for the pound/dollar pair. The price managed to get out of the rising channel, so the upward trend was canceled. Instead of a channel, a new descending trend line has been formed, which is where the price is staying at this time. A rebound from this trendline will significantly increase the likelihood of a resumption of the downward trend. Bears need this to rebound off the trend line, and at the same time from the 1.3004-1.3024 area. If the rebound is executed, we will expect quotes to fall to the support area of 1.2873-1.2888. At the same time, the Kijun-sen and Senkou Span B lines may not offer any resistance to the price.
GBP/USD 15M
The lower linear regression channel began to turn to the upside on the 15-minute timeframe, but the movements of the last two trading days are such that it is time to talk about panic, but not about calm, measured trading.
COT report
A new Commitments of Traders (COT) report on the British pound showed that non-commercial traders were practically resting between September 29 and October 5. The pound increased by about 140 points in this period, which, in principle, is not so much, a little more than the average daily volatility of this currency. The "non-commercial" group of traders opened 1,093 Buy-contracts (longs) and closed 435 Sell-contracts (shorts) during this time. Thus, the net position of professional traders slightly increased by 1,500 contracts. However, as with price changes, these changes in the mindset of professional traders are purely formal. It is impossible to draw any conclusions or predictions about the pair's future movement based on them. In general, the "non-commercial" group has been decreasing its net position since the beginning of September, which means that their bearish mood is strengthening. In principle, this particular behavior from large traders completely coincides with what is happening on the market during this period of time, but despite the pound's growth in the last few trading days, it still goes back to falling. Nonprofit traders have more sell contracts, and UK fundamentals remain extremely weak and dangerous for the pound in terms of the outlook for the rest of 2020 and all of 2021.
No news from the UK on Wednesday, October 14. Markets continue to wait for accurate and clear information on the negotiations between London and Brussels, however, on the eve of the EU summit, which starts today, things have frankly begun to get tense. And when the markets are nervous, there is no question of any calm movements. According to the results of the summit, absolutely different results may be announced by today or tomorrow. Further trading of the British pound will be conducted depending on these results. Accordingly, now there is no point in guessing how the summit might end and what decisions will be made. Even EU and British officials themselves do not know if the deal will end up or not. Accordingly, the pound, even from the current positions, can suddenly move up and down again. In addition to the EU summit, no macroeconomic events are scheduled in the United States or Great Britain today. However, do not forget that topics such as coronavirus in the UK or US elections can also have an impact on the pair's movement. However, no one can predict what the next news will be on one of these topics, which means that the degree of uncertainty of further price movement increases.
We have two trading ideas for October 15:
1) Buyers for the pound/dollar pair have released the initiative from their hands. Therefore, long positions are not relevant right now, however, if the new trend line is overcome, you can consider them and aim for 1.3105 and 1.3177. Take Profit in this case will be from 50 to 120 points. However, we draw the attention of traders to very frequent changes in the direction of movement, so we recommend trading in small lots.
2) Sellers tried to seize the initiative again, but today they released the pair up again. If they manage to stay below the trend line and a rebound follows from it, then it will be possible to open new short positions in small lots with the targets of the Kijun-sen line (1.2972) and Senkou Span B (1.2925), support level of 1.2903 and the support area of 1.2873-1.2888. Take Profit in this case can be up to 140 points.
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.