GBP/USD 15M
Both linear regression channels turned to the downside on the 15-minute timeframe. Thus, in the short term, the upward trend changed to a downward one after buyers failed to overcome the 1.3606-1.3626 area.
GBP/USD 1H
The GBP/USD pair began a new round of downward movement on Monday and broke the rising trend line. Thus, buyers failed to take the pair above the previous local high. At the moment, the quotes fell to the critical Kijun-sen line, which keeps them from falling further. However, if this line is crossed, the downward movement might reach targets like the Senkou Span B line and the support level of 1.3274. We have already mentioned that we expect a powerful and strong downward movement. Considering the fact that the pair has rebounded from the resistance area of 1.3606-1.3626 twice, creating a Double Top pattern is also possible. And we have already mentioned the fundamental background a million times. And in the past few months, and in the next couple of months, it will be extremely difficult for the pound to find reasons for growth. The deal is a bargain, and the British economy continues to experience serious problems. And this is noted by the Bank of England and many experts and analysts.
COT report
The GBP/USD pair increased by 80 points during the last reporting week (December 8-14). Small price changes, but in general, the pound remains in a steady upward trend. But the latest Commitment of Traders (COT) report gave us data that does not allow us to draw any specific conclusions and forecasts. The changes were minimal and contradictory. Professional traders closed 4,000 Buy-contracts (longs) and 2,300 Sell-contracts (shorts) during the reporting week. Thus, the net position of the most important group of traders decreased by 2,300, which is not much. This means that major players have become more bearish. But it is best to pay attention to the first indicator in order to understand what is happening with the mood of non-commercial traders. The green line (as well as the red one) constantly changes the direction of movement: up and down. This indicates the lack of a clear and firm attitude of the non-commercial group. So now it is impossible to draw any conclusions. The pound has continued to grow for three months (and this is the last round of its growth), but COT reports do not state that the mood among non-commercial traders became more bullish. Or that any group of traders at this time actively increased purchases of the pound. The new COT report did not come out on Friday because of Christmas.
The fundamentals for the British currency were blank on Monday. News such as that the European Council has approved a "temporary application" of the trade deal, as the European Parliament is not going to vote for it until next year, is not considered significant. Basically, traders had nothing to react to. Plus the holidays are about to begin. We are inclined to believe that traders are now starting to cut long positions, which will cause the pound's quotes to drop. We continue to expect a downward trend.
No news or reports scheduled for the second trading day of the week. As well as for the entire week. Traders have to wait for the British Parliament's verdict regarding the same deal, but we believe that there should be no problems with the adoption by British MPs. The British opposition simply doesn't have enough power in Parliament to block the deal or to counter Prime Minister Boris Johnson's opinion. Nothing more is expected in the coming days.
We have two trading ideas for December 29:
1) Buyers for the pound/dollar pair retreated, finding no reason and grounds to continue buying the pound around 2.5-year highs. At the moment, the upward trend has been canceled; nevertheless, in the event of a price rebound from the Kijun-sen line (1.3441), it will be possible to re-examine buy orders while aiming for the resistance area of 1.3606-1.3626. Take Profit in this case will be up to 120 points.
2) Sellers have seized the initiative in the market and have excellent chances to continue moving down. Thus, we recommend selling the pound/dollar pair while aiming for the support level of 1.3274 and the 1.3160 -1.3184 area if the price manages to overcome the Kijun-sen line (1.3441). Take Profit in this case can range from 70 to 160 points.
Forecast and trading signals for EUR/USD
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.
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.