GBP/USD 1H
The GBP/USD currency pair continued to rise on October 21, as it easily crossed the Kijun-sen line, the resistance level of 1.3044 and by the end of the day, it even reached the resistance area of 1.3161-1.3185. Thus, after overcoming the descending trend line that was rebuilt, we can say that the upward trend prevails in the market. However, at the same time, traders should take note of the fact that quotes have often been changing their direction in recent weeks. Thus, the option is not excluded, in which after a rebound from the 1.3161-1.3185 area, a downward correction will begin no weaker than the upward movement itself. Overcoming this area will allow the bulls to look forward to further growth.
GBP/USD 15M
Both linear regression channels turned to the upside on the 15-minute timeframe, which perfectly reflects the nature of the pair's movement on the hourly chart.
COT report
The latest Commitments of Traders (COT) report on the pound showed that from October 6-12, non-commercial traders continued to mostly close contracts for the British currency, rather than open new ones. The pound sterling increased by around 60 points during this period, which is very small, despite the rather volatile trading within each individual day. During this time, the "non-commercial" group of traders opened 149 Buy-contracts (longs) and closed 6,144 Sell-contracts (shorts). Thus, the net position of professional traders has grown again, by 6,000 contracts. However, as with price changes, these changes in the mindset of professional traders are purely formal. Moreover, the net position of non-commercial traders is growing for the third consecutive week, which casts doubt on the pound's succeeding decline, which is much more expected than growth. Even more interesting is the fact that the total number of contracts for the "non-commercial" group has been decreasing in recent months. That is, large traders do not believe in the pound and do not want to deal with it, whether it is about buying or selling it. The same case with the "commercial" group, which also mainly closes any contracts for the pound. In such circumstances, we would not make a long-term forecast based on the COT report.
The UK published September CPI on Wednesday. Inflation has risen by 0.5% this month compared to September last year and 0.4% compared to August. Market participants expected to see approximately the same values. These values cannot be called either failures or strong, since in general they are weak, but at the same time correspond to forecasts. Thus, it is unlikely that the pound gained 200 points during the day thanks to this report. Bank of England Governor Andrew Bailey is scheduled to speak on October 22 in the UK. And this event is interesting because he can touch on the topic of stimulating the British economy. Recall that traders have long been waiting for the central bank to reduce the key rate to the negative area. However, the central bank continues to delay this moment with its last bit of strength. True, no one in the market doubts that this moment will come anyway, since the prospects for the British economy remain extremely dim. Also this year, the BoE may expand the quantitative incentive program. Traders expect this kind of information, regarding the plans and timing of innovations, from the head of the Bank of England.
We have two trading ideas for October 22:
1) Buyers for the pound/dollar pair easily overcame the 1.3006-1.3024 area, which they could not take a day earlier, but immediately ran into the next resistance area of 1.3161-1.3185. Therefore, you can consider long positions while aiming for 1.3265, if this area is overcome. Take Profit in this case will be up to 70 points. However, take note of very frequent changes in direction of movement and relatively high volatility, so we advise trading carefully.
2) Sellers were unable to keep the pair below the downward trend line. Thus, you can only consider sell orders below the Kijun-sen (1.3016) and Senkou Span B (1.2962) lines while aiming for the support area of 1.2857-1.2872 and the 1.2823 level. Take Profit in this case can range from 80 to 120 points. This variation is not expected today, although the pair may drop to the Senkou Span B.
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.