Fundamental analysis

Outlook for GBP/USD on October 25. Trading signals. COT report. Rishi Sunak will become the new British prime minister.

GBP/USD 5M

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The GBP/USD currency pair was also being difficult on Monday. Moreover, if the euro/dollar pair rose slightly in the afternoon on the basis of weak macroeconomic statistics from overseas, the pound/dollar grew without it, which once again proves the fact that both pairs are now traded inadequately. Do not be frightened by the word “inadequate”, we just want to say that at this time the movements are such that they are more difficult to win back than at normal times. Remember when the pound was trading 200 points a day, how nice it was to open any positions! But those days are gone. Now both pairs are likely to consolidate, and traders are developing new trading tactics. Both the euro and the pound are now in a position where further decline is no longer obvious, and there is no reason to buy. In the meantime, this morning it became known that Rishi Sunak will become the new prime minister even without any elections. Penny Mordaunt withdrew her candidacy from the election, so Sunak was the only candidate and automatically won. Let’s see what this man can do as prime minister.

There were fewer trading signals for the pound on Monday than for the euro, which is even good. However, the first two trading signals near the level of 1.1354 also turned out to be false and did not even allow traders to set Stop Loss on open positions. Both closed at a loss. The third signal should not have been worked out, since the first two turned out to be false. Once again, we remind you that this week’s movements can be as “torn” and complex as possible, which should be taken into account when entering the market. The nature of the movement of the pair is best seen on the 4-hour TF – a flat.

COT report:

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The latest Commitment of Traders (COT) report on the British pound showed a new growth in bearish sentiment. In the given period, the non-commercial group closed 8,600 long positions and opened 3,400 short positions. Thus, the net position of non-commercial traders fell by 12,900, which is quite a lot 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 40,000 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, here the bulls have an advantage of 25,000. 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.

We recommend to familiarize yourself with:

Overview of the EUR/USD pair. October 25. Boring Monday without bright splashes at the US session.

Overview of the GBP/USD pair. October 25. Elections, elections…

Forecast and trading signals for EUR/USD on October 25. Detailed analysis of the movement of the pair and trading transactions.

GBP/USD 1H

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The pound/dollar pair is trading very inadequately on the hourly timeframe. The price often changes the direction of movement and travels impressive distances in each of them. The lines of the Ichimoku indicator are also ignored, which speaks of the same “swing”. On Tuesday, trading could be performed at the following levels: 1.0930, 1.1060, 1.1212, 1.1354, 1.1486, 1.1649. The Senkou Span B (1.1179) and Kijun-sen (1.1231) lines can also be sources of signals. Signals can be bounces and breakouts of these levels and lines. The Stop Loss level is recommended to be set to breakeven when the price passes in the right direction by 20 points. Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. The chart also contains support and resistance levels that can be used to take profits on positions. There are no major events or reports scheduled for today in the UK and US. Thus, it is even more likely that we will see a new “swing”. There are practically no important macroeconomic events left for the pound and the dollar this week, so until the end of the week, traders will have practically nothing to pay attention to. The probability of a flat is also growing.

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 – www.instaforex.com


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