Fundamental analysis

Outlook and trading signals for GBP/USD on November 4. COT report. Analysis of market situation. The Bank of England finished

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Analysis of GBP/USD, 5-minute chart


The GBP/USD currency pair continued to fall on Thursday. Most of it happened even before the announcement of the results of the Bank of England meeting, that is, it was a reaction to the results of the Federal Reserve meeting. A day earlier, we warned you that the market could work out Fed Chairman Jerome Powell’s speech and the US rate hike within 24 hours. And so it happened. Thus, by the end of Thursday, the pair’s quotes fell to the level of 1.1150 and settled below the rising trend line. Despite the fact that a tangible upward correction may now begin, the uptrend is broken, and the pound gets a new opportunity to fall to its absolute lows. Take note that the results of the BoE meeting were not dovish. The key rate rose by 0.75%, as expected by the majority. But the speech of BoE Governor Andrew Bailey, who described the prospects for the British economy in gloomy tones, turned out to be very pessimistic. In general, the British pound had few reasons to grow. Especially if we remember that the previous seven rate hikes had no positive effect on the pound.

In regards to trading signals, the situation was quite good. Quotes settled below the level of 1.1354 at the beginning of the European trading session, so traders had to open a short position. Subsequently, the price fell to the level of 1.1212 and overcame it. There was no buy signal until the end of the day, so traders had to close the shorts manually. Profit on them amounted to at least 150 points, with which we congratulate everyone.

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 canceled the upward trend on the one-hour chart, but the pound may still rise in the next few days, as an upward correction is needed. The price is now below the Ichimoku indicator lines, so the probability of further decline is high. We also recall that today is the third “crazy” day in a row, as the most important reports on the labor market and unemployment will be published in the United States. You need to be ready for the pair’s “flights” today. On Friday, the pair may trade at the following levels: 1.0538, 1.0930, 1.1060, 1.1212, 1.1354, 1.1486, 1.1649. Senkou Span B (1.1351) and Kijun-sen (1.1376) lines can also give signals if the price rebounds or breaks these levels. The Stop Loss level is recommended to be set to breakeven when the price passes in the right direction by 20 points. 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. Today, the UK will release the index of business activity in the construction sector. But this report is unlikely to provoke a market reaction. But NonFarm Payrolls reports and unemployment in the US can and should do it.

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 –