Trading Recommendations and Analysis for GBP/USD on October 10; US Inflation to Set a New Momentum

The GBP/USD currency pair continued to lean towards a decline throughout Wednesday. Once again, it failed to reach the nearest target of 1.3050, but in recent days, it's clear that the price no longer has the same momentum for a decline as it did last week. This is unsurprising, given that the macroeconomic background has been virtually absent this week. Representatives of the Federal Reserve (Fed) speak every day, and last night, the minutes of the previous meeting were released. However, no fundamentally new information reached the market. As a result, volatility this week has been extremely low, and market participants are openly waiting for the inflation report.

This report could show any result. It won't affect the dollar's medium-term prospects anymore. If inflation for September decreases more than the market expects, it could lead to the necessary upward correction in the EUR/USD and GBP/USD pairs, as the market would expect another 0.5% rate cut by the Fed in November. If inflation slows down less than expected, the dollar might strengthen a bit more, as expectations for a 0.5% rate cut at the next meeting will drop sharply. The Fed has yet to achieve complete victory over inflation.

From a technical perspective, the British pound may recover to the 1.3175 level in the near term. However, each trader must decide for themselves whether to buy a pair that is likely beginning a medium-term downtrend.

No trading signals were formed yesterday. The price only approached the 1.3050 level once but failed to reach it even with some deviation. Therefore, there were still no grounds for entering the market. Additionally, for most of the day, the pair remained sideways.

The COT reports on the British pound show that commercial traders' sentiment has been constantly changing in recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, frequently intersect and are mainly close to the zero mark. We also see that the last downward trend coincided with a period when the red line was below zero. The red line is above zero, and the price has broken through the important level of 1.3154.

According to the latest report on the British pound, the non-commercial group opened 6,100 BUY contracts and closed 600 SELL contracts. Thus, the net position of non-commercial traders increased by 6,700 contracts over the week. Market participants continue to accumulate the British pound.

The fundamental backdrop still does not provide any grounds for long-term purchases of the British pound, and the currency itself has a real chance of resuming a global downtrend. However, on the weekly timeframe, we have an ascending trend line, so until it is broken, a long-term decline in the pound cannot be expected. The British pound rises against almost everything, and even when the COT reports indicate that major players are selling the pound, it continues to rise.

The GBP/USD pair continues to decline firmly in the hourly time frame. The upward trend has been canceled, and we should expect only a further drop in the British currency, which could be both significant and prolonged. Of course, the market could still resume unfounded purchases of the British currency, but let's remember once more—there are no fundamental or macroeconomic reasons for this. Thus, as before, we support only the downward movement, although the pair may correct upward during the current week.

For October 10, we highlight the following important levels: 1.2796-1.2816, 1.2863, 1.2981-1.2987, 1.3050, 1.3119, 1.3175, 1.3222, 1.3273, 1.3367, 1.3439. The Senkou Span B line (1.3261) and the Kijun-sen line (1.3114) may also serve as signal sources. Setting the Stop Loss level to break even if the price moves 20 pips in the intended direction is recommended. The lines of the Ichimoku indicator may shift throughout the day, so this should be considered when determining trading signals.

No significant events are scheduled for Thursday in the UK, while in the US, the key and essentially the only important report of the week—inflation—will be released. The reaction to this report is expected to be strong, as the market has been anticipating it all week.

Support and Resistance Levels: Thick red lines near which price movement may end. They are not sources of trading signals.

Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred to the hourly time frame from the 4-hour chart. They are strong lines.

Extremes Levels: Thin red lines from which the price has previously bounced. They serve as sources of trading signals.

Yellow Lines: Trend lines, trend channels, and any other technical patterns.

Indicator 1 on COT charts: The size of the net position for each category of traders.