FX.co ★ Technical analysis of GBP/USD for September 23. COT report. Janet Yellen calls on Congress to increase debt ceiling

GBP/USD – 1H

Hello, dear traders!

On the H1 chart, GBP/USD dropped to the 127.2% retracement level of 1.3517 and closed below it. The price is expected to fall to the 161.8% retracement level of 1.3409. The trend may reverse if the quote closes above 1.3517. In such a case, the pair may rise to the 100.0% retracement level of 1.3601. While Fed Chair Jerome Powell keeps talking about recovery prospects for the labor market and the reduction in asset purchases, US Treasury Secretary Janet Yellen is calling on Congress to raise the debt limit. According to the Treasury Secretary, the government will run out of money by October 18. In such a case, the country risks a technical default. Janet Yellen has repeatedly warned Congress, but the government continues ignoring her words.

The truth is there is no particular threat to the United States. Indeed, it is hardly possible that Congress will refuse to raise the debt limit. All in all, even a technical default can deliver a severe blow to the prestige and reputation of any country, especially when it comes to the US, the world's largest economy. The Treasury Secretary also pinpointed that the economy might slow in case of a technical default. According to Yellen, it may plunge the US into recession and have catastrophic consequences because the economy has not recovered from the coronavirus pandemic yet. Thus, Congress is running out of time to raise the debt ceiling. If it votes yes before October 18, it will allow the country to continue borrowing money and issuing Treasury bonds. Anyway, traders do not seem deeply worried about that and keep buying the greenback.

GBP/USD – H4

On the H4 chart, GBP/USD reversed and closed below the 38.2% retracement level of 1.3642. The price is expected to fall to the 50.0% retracement level of 1.3457. In case of a rebound from this level, the quote may rise to 1.3642. Neither of the indicators formed divergence today.

Macroeconomic calendar:

US - Fed Chair Powell speaks

UK - BoE Governor Bailey speaks

The market will focus on these two speeches. However, it may happen that both policymakers repeat what they have already said.

Commitments of Traders report:

According to the latest COT report as of September 21, the bearish sentiment of major market players increased. This week, speculators opened 7,519 long positions and 13,107 short ones. The number of short positions is twice as high. The chart illustrates that the number of long and short positions is in line among all the groups of traders. A week ago, an opposite situation took place. Generally speaking, the pound sterling is unlikely to rise after the COT report. Thus, the market is neither bullish nor bearish.

GBP/USD forecast:

It is wise to open short positions after the price closes above 1.3517 on the H1 chart with the targets at 1.3601 and 1.3674. Right now, it is too risky to open new short positions because the pair has already plunged by 200 pips in a day. Nevertheless, you may consider selling the pair as long as the quote is located below 1.3517.

TERMS:

Non-commercial traders are major market players: banks, hedge funds, investment funds, private, and large investors.

Commercial traders are commercial enterprises, firms, banks, corporations, and companies that buy currency not to yield 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.