GBP/USD – 1H.
On the hourly chart, the GBP/USD pair has consolidated under the retracement level of 100.0% or 1.3411 on Monday. Therefore, the downward movement could continue towards the next Fibonacci level of 127.2% or 1.3296. A close above the 100.0% level would be in favour of the UK currency and a new bullish attempt to push it higher. On Monday the information background was rather weak. There were no important news and events in either the UK or the US. A couple of days ago one would have assumed that bear traders had exhausted their potential. After all, the pound sterling has been falling for quite some time. However, a new week has started and the British pound has fallen again. Thus, even a possible tightening of monetary policy by the Bank of England in December, which could have supported the pound, did not help it.
This morning, the UK released reports on ISM Services Index (down to 58.6 points in November) and manufacturing PMI (up to 58.2 points). As one indicator rose and the other declined, there was no obvious reaction from traders. Now we just have to wait for the US business reports, but it is already clear that the pound is set to fall again. It is hard to say whether the conflict between London and Brussels, which can lead to a trade war or a significant deterioration in trade relations between the country and the bloc, has any impact. However, it is possible that this factor also plays a significant role. In the US, however, things are pretty good at the moment. In December the QE program can and should be reduced by a further $15bn. Perhaps the Fed will decide to accelerate the tapering process. Such a scenario has not been ruled out either. The Bank of England is also due to start tapering QE, but traders either don't believe in it.
GBP/USD – 4H.
On the 4-hour chart, GBP/USD reversed downwards in favor of the US currency and closed at 1.3457, below 50.0% Fibonacci correction level. Thus, the pair might carry on with its decline towards 1.3274, the next Fibonacci level of 61.8%. The bullish divergence of the CCI indicator allowed traders to reckon a further growth but was canceled.
Economic calendar for US and UK
UK - Manufacturing PMI (09-30 UTC).
UK - Services PMI (09-30 UTC).
United States - Manufacturing PMI (14-45 UTC).
United States - Services PMI Index (14-45 UTC).
UK - Speech of Andrew Bailey, Governor of Bank of England (15-00 UTC).
The UK and the US have already released all the reports on Tuesday. However, there is still the Governor's speech from the Bank of England today, which could be very interesting. So, today's information background is weak.
COT(Commitments of traders):
The recent COT report on GBP/USD from November 16 shows that large market players are turning more bearish. On the reported week, speculators closed 3,990 long contracts and opened 16,809 short contracts. Notably, the number of short contracts has been strongly increasing for the second week in a row. All in all, speculators opened almost 40,000 short contracts for two weeks. In other words, half of the newly opened contracts are short ones. A week ago, the number of long contracts was 17,000 more. Nevertheless, speculators are hesitant to express clear market sentiment. They increase buy positions and then suddenly increase sell contracts, but the total number of long and short contracts for all categories of traders remain roughly the same: 206K – 198K. Hence, after a few weeks of active selling GBP/USD, speculators may rush opening long positions.
Outlook for GBP/USD and trading tips
I would recommend selling GBP/USD if the pair closes below 1.3411 with the target at 1.3296. Alternatively, buy positions are recommended if the price closes above 1,3411 at the daily chart with the target at 1.3511.
Terms
The Non-commercial category includes major market players: banks, hedge funds, investment funds, private, and large investors.
The Commercial category embraces commercial enterprises, firms, banks, corporations, companies that buy currency not to obtain speculative profit, but to ensure current activities or export-import operations.
The category of Non-reportable positions means retail traders who do not have a significant impact on the price.