FX.co ★ Analysis for GBP/USD, September 22. COT report.

GBP/USD – 1H.

Greetings! On the 1H chart, the GBP/USD pair climbed to the correction level of 23.6% - 1.3692. Then it rebounded from this level and fell to the levels of 1.3602 and 1.3572. At the moment, the British currency is trading at its multi-month lows. This is why the further growth of the greenback seems obscure. Besides, the Fed is going to announce the results at today's meeting. Tomorrow, the Bank of England will voice its decision on monetary policy. Despite the fact that traders have some predictions on the possible outcomes of both meetings, they prefer to stick to a wait-and-see approach. Investors refrain from opening open new traders so as not to incur losses if the Fed or the Bank of England choose an entirely different path. Today and tomorrow are extremely important dais for the pound sterling. On the 4H chart, it is clearly visible that its quotes have dipped to the multi-month lows. The further trajectory of the pound sterling depends on whether bears will be able to keep the quotes below these levels.

Today, the British currency has a greater chance to gain momentum than tomorrow. The Fed is widely expected to postpone the announcement of the decision to taper the quantitative program for November or December. If so, the US currency may extend losses. Many analysts doubt a rapid switch to a hawkish tone from the Bank of England now. Recently, Andrew Bailey, the Governor of the Bank of England, announced that the minimum conditions for raising the key rate have been reached. However, he did not clarify the approximate timing. The Bank of England has not even announced the reduction of its QE program totaling £895 billion. Moreover, at the last three meetings, only one member of the FOMC out of nine voted in favor of trimming the program. Thus, the Bank of England is likely to take a wait-and-see approach, following the Fed's course of action. Notably, the UK has just begun to wind down the furlough scheme. So, the Bank of England is highly likely to decide to wait how it will affect the labor market.

GBP/USD – 4H.

On the 4H chart, the GBP/USD pair rebounded from the correction level of 38.2% - 1.3642 and rose to the Fibo level of 23.6% - 1.3690. However, it was unable to consolidate at this level and fall back to the level of 1.3642. So, a new rebound from this level is likely to strengthen the pound sterling. If the price fixes below this level, the downward movement may continue. However, today and tomorrow, its trajectory will depend on the decisions of two central banks, not on technical signals.

Economic calendar for US and EU:

US - FOMC decision on key rate (18:00 UTC).

US – Accompanying FOMC statement (18:00 UTC).

US - FOMC economic projections (18:00 UTC).

US - FOMC press conference (18:30 UTC).

On Wednesday, the economic calendar for the UK does not contain significant reports. However, the results of the Fed meeting will be summed up in the evening, which may cause sharp volatility (depending on the decisions taken and Jerome Powell's statements).

COT report (Commitments of traders):

The latest COT report published on September 14 for the pound sterling showed that the mood of major players has become more bullish. During the reporting week, speculators opened 14,796 Long contracts and closed 14,526 Short contracts. Thus, the balance of power between bulls and bears has changed dramatically. Now, there are more long contracts - 45, 673, and 39,296 short contracts. Although a week ago the situation was the opposite. Thus, despite the fall last week, the pound sterling may regain ground after the latest COT report. What is more, the Commercial category of traders got rid of 66,000 Long contacts and 33,000 Short contracts. The total number of contracts on their hands for the week decreased by a third.

Outlook and recommendations for GBP/USD:

Yesterday, it was recommended to open short trades on the pound sterling if there was a rebound from the level of 1.3692 on the 1H chart. The rebound did occur. So, now, it would be a wise decision to keep short positions with the targets of 1.3602 and 1.3572. It is recommended to sell if there is a rebound from the level of 1.3602 or 1.3572 with targets of 1.3692 and 1.3731. In the evening, all trading recommendations will be irrelevant as fundamental factors will interfere.

TERMS:

"Non-commercial" - major market players: banks, hedge funds, investment funds, private investors.

"Commercial" - commercial enterprises, firms, banks that buy foreign currency not for speculative profit, but to ensure current activities or export-import operations.

"Non-reportable positions" are small traders who do not have a significant impact on the price.