Fundamental analysis

Outlook and trading signals for GBP/USD on November 2. COT report. Analysis of market situation. The pound does not show

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Analysis of GBP/USD, 5-minute chart


The GBP/USD currency pair tried to resume its upward movement on Tuesday, but after bouncing from the critical line, it fell. In general, we cannot say that the decline over the past few days has been strong. Rather, on the contrary, it was rather weak and with frequent rollbacks to the top. If you wish, it is quite easy to explain why the pair is moving this way, and at the same time why the euro is falling faster and stronger. The fact is that the European Central Bank meeting is already behind us, and the results of the Federal Reserve meeting will be announced today. Thus, the dollar already has good reasons to rise, which it does against the euro. In the case of the pound, the Fed meeting is not the only thing that is important, but also the Bank of England meeting, which will take place this Thursday, and at which the rate will also be raised. Therefore, the pound falls in general more slowly and weaker than the euro. We can only wait for both meetings of the central banks and see how the market reacts to them.

A sufficient number of signals were formed on the 5-minute chart on Tuesday, but most of them turned out to be false. The pair moved without a definite direction during the European trading session, so three false signals were formed near the critical line. According to the rules of the trading system, traders could try to work out the first two. In the first case, the price went down 20 points, so Stop Loss should have been placed at breakeven. In the second case, it did not pass 20 points, so the position closed with a small loss when the price settled above the Kijun-sen line. A sell signal was also formed near the level of 1.1486, but it did not bring profit either, since the position was also closed by Stop Loss at breakeven.

COT report


The latest Commitment of Traders (COT) report on the British pound showed a slight weakening of the bearish sentiment. In the given period, the non-commercial group opened 3,200 long positions and closed 200 short positions. Thus, the net position of non-commercial traders increased by 3,400, which is very small for the pound. The net position indicator has been growing slightly in recent weeks, but this is not the first time it has risen, but the mood of the big players remains “pronounced bearish” and the pound remains on a downward trend in the medium term. And, if we recall the situation with the euro, then there are big doubts that based on the COT reports, we can expect a strong growth from the pair. How can you count on it if the market buys the dollar more than the pound? The non-commercial group now has a total of 91,000 shorts and 43,000 longs open. The difference, as we see, is still very large. The euro cannot show growth if the major players are bullish, and the pound will suddenly be able to grow if the mood is bearish? As for the total number of open longs and shorts, the bulls have an advantage of 18,000 here. But, as we can see, this indicator does not help the pound too much either. We remain skeptical about the long-term growth of the British currency, although there are still certain technical reasons for this.

Analysis of GBP/USD, 1-hour chart


The pound/dollar pair is moving upwards on the one-hour chart, which so far looks quite convincing. The price went only slightly below the Kijun-sen line, which is not critical yet. However, Wednesday and Thursday can dramatically change the situation for the pair. Today we expect the dollar to rise, but it is rather difficult to say where the pound will end up on Friday. On Wednesday, the pair may trade at the following levels: 1.1060, 1.1212, 1.1354, 1.1486, 1.1649, 1.1760, 1.1874. Senkou Span B (1.1351) and Kijun-sen (1.1543) lines can also give signals if the price rebounds or breaks these levels. The lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. Also, there are support and resistance levels that can be used to lock in profits. No interesting reports planned in the UK, and we only have the ADP report in the US, which rarely provokes the market to react. Thus, the key event of the day will be the Fed meeting late in the evening. Traders will have to leave the market as soon as it starts.

What we see on the trading charts:

Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals.

The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines.

Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals.

Yellow lines are trend lines, trend channels, and any other technical patterns.

Indicator 1 on the COT charts reflects the net position size of each category of traders.

Indicator 2 on the COT charts reflects the net position size for the non-commercial group.

The material has been provided by InstaForex Company –