Overview of GBP/USD on October 9; British Inflation Can't Make the Final Step

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On Tuesday, the GBP/USD currency pair showed no urgency in its movement. There was a lack of fundamental and macroeconomic background, and the market hesitated to make trading decisions ahead of the U.S. inflation report. We've mentioned before that certain analysts and experts somewhat overvalue this report at this time. A few months ago, any deviation from the forecast by 0.1% would provoke a stronger reaction from traders than a meeting of the Federal Reserve or the Bank of England. Back then, market participants did not know when the monetary easing would begin in the UK and the U.S. or how fast it would be. It's clear that the Fed will reduce rates at every meeting until the end of the year, and the market has already priced in the most dovish scenario. Therefore, the U.S. dollar no longer has reasons to fall. But at the same time, there are also no reasons for the pound sterling to fall, as the BoE might only cut the key rate once more by the end of the year.

Problems in the British economy are clearly visible, so a lower rate would benefit it. However, inflation in the UK has started to accelerate again, and within the BoE, there is an expectation that it will rise to 2.8% year-on-year in the coming months. The results of a survey conducted by the British central bank among companies were also discouraging. The data showed that expected inflation in September is 2.6%. The survey results also revealed declining business uncertainty and unchanged wage growth rates. However, what matters most to us is inflation. If inflation continues to rise in the near future, the BoE will have no reason to lower the key rate. This factor could support the British currency, which has been rising for two years without apparent reason but now finds additional backing.

There are currently no technical reasons to expect a new rise in the pair. In the 4-hour time frame, the price is below the moving average line, and in the daily time frame, it is below the critical line. Therefore, further decline is possible. The market will now be trading based on the most important reports on inflation and the U.S. labor market, and such reports are published at best once a week. That said, we cannot entirely rule out the possibility of the British currency returning to its groundless growth. The BoE's policy seems to support the pound, but in the past two years, such support has been rare compared to the pound's growth. Therefore, the pound remains overbought, though, on the daily time frame, the uptrend appears to be continuing rather than a downtrend beginning. So far, the price has yet to reach the nearest local low. Thus, we are waiting for the inflation report, which could help the pair either start an upward correction or break through the September 11 low.

The average volatility of the GBP/USD pair over the last five trading days is 93 pips. For the pound/dollar pair, this is considered "average" volatility. Therefore, on Wednesday, October 9, we expect movement within a range of 1.2992 and 1.3178. The higher linear regression channel is directed upward, signaling the continuation of the upward trend. The CCI indicator formed six bearish divergences before any significant decline occurred. The indicator has entered the oversold area and formed a bullish divergence, indicating a possible upward correction.

Nearest Support Levels:

• S1 – 1.3062
• S2 – 1.3000
• S3 – 1.2939

Nearest Resistance Levels:

• R1 – 1.3123
• R2 – 1.3184
• R3 – 1.3245

Trading Recommendations:

The GBP/USD currency pair has finally settled below the moving average and started a significant decline. We are still not considering long positions, as we believe that all growth factors for the British currency have already been priced in by the market several times. However, it would be unwise to rule out the possibility that the pound could continue rising for a while due to momentum. Therefore, if you trade based on pure technical analysis, long positions are possible with targets at 1.3306 and 1.3367 if the price is above the moving average. Short positions are much more relevant now, with targets at 1.3000 and 1.2992.

Explanation of the Illustrations:

Linear regression channels: help determine the current trend. If both channels point in the same direction, it indicates a strong trend.

Moving average line (settings 20,0, smoothed): determines the short-term trend and the direction in which to trade.

Murray levels: target levels for movements and corrections.

Volatility levels (red lines): the probable price range the pair will trade over the next 24 hours, based on current volatility indicators.

CCI Indicator: entering the oversold area (below -250) or the overbought area (above +250) signals an imminent trend reversal in the opposite direction.

The material has been provided by InstaForex Company - www.instaforex.com #

Overview of EUR/USD on October 9; The Euro Still Has Nothing to Say

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The EUR/USD currency pair traded leisurely again on Tuesday, with no urgency. And why should it rush? This week, the U.S. inflation report is the only significant event. It could move the EUR/USD pair either up or down. We believe that the pace of inflation decline in the U.S. is no longer as important as it used to be, just as the rate of inflation decrease in the Eurozone isn't either. Both central banks have started the process of easing monetary policy, so the speed at which inflation is falling is now less relevant. What matters now is how quickly both central banks will cut interest rates. However, as we've seen recently, the pace of rate cuts is no longer solely dependent on inflation. The labor market is a significant concern for the Federal Reserve, while the state of the economy is critical for the European Central Bank (ECB). Both central banks are now accelerating their easing measures. The ECB promises to lower rates in both October and December, while the Fed has started easing with a 50 basis point cut, and we cannot entirely rule out the possibility of a similar move in November.

In our view, the key issue is the market's full or near-full pricing in the Fed's rate cut factor. Let's recall that the U.S. dollar has been falling for two years, and even in recent months (when the ECB was cutting rates), the dollar has continued to decline. The latest reports on the labor market and unemployment were positive, diminishing the need for a 50 basis point cut in November. However, the market still anticipates the most dovish scenario. According to FedWatch, the probability of a 0.5% rate cut on November 7 is now 86%. If the inflation report shows weaker deceleration, this probability will reach 100%. In any case, the September labor market and unemployment reports will be published before the next Fed meeting, so only after these can we confidently assess how much the Fed may lower the key rate.

As for the euro, it is now entirely dependent on the dollar. Essentially, it wasn't the euro that rose in 2024 but the dollar that fell amid the ever-growing dovish market expectations. We still consider the euro overbought and unjustifiably expensive, so we only expect it to fall. The first two days of the week didn't clarify the current technical picture since the movements were very weak. In the weekly time frame, the pair has been on a flat trend for a year and a half. Therefore, we are only expecting a decline. There could be an upward correction this week, and the U.S. inflation report might contribute to that. Inflation would need to slow down more than 2.3% for this to happen. In that case, the market would be confident in a 0.5% Fed rate cut on November 7, which would temporarily pressure the U.S. dollar. However, we do not expect significant growth for the pair.

The average volatility of the EUR/USD currency pair over the past five trading days as of October 9 is 50 points, characterized as "moderate-low." We expect the pair to move between the levels of 1.0923 and 1.1023 on Wednesday. The higher linear regression channel points upward, but the overall downward trend remains. After repeatedly entering the overbought zone, the CCI indicator has now dipped into the oversold zone and formed a bullish divergence, indicating a possible correction.

Nearest support levels:

• S1 – 1.0925
• S2 – 1.0864
• S3 – 1.0803

Nearest resistance levels:

• R1 – 1.0986
• R2 – 1.1047
• R3 – 1.1108

Trading Recommendations:

The EUR/USD pair has started a downward movement. In previous reviews, we mentioned that we expect only a decline in the euro in the medium term, as any new rise would seem absurd at this point. There is a possibility that the market has already priced in most, if not all, of the future Fed rate cuts. If that's the case, the dollar has no reason to fall. Short positions can be considered with targets at 1.0925 and 1.0917. If you're trading based purely on technical analysis, long positions may become relevant if the price settles above the moving average line. Momentum could drive the pair's growth for some time, but we still cannot recommend buying the pair.

Explanation of the Illustrations:

Linear regression channels: help determine the current trend. If both channels point in the same direction, it indicates a strong trend.

Moving average line (settings 20,0, smoothed): determines the short-term trend and the direction in which to trade.

Murray levels: target levels for movements and corrections.

Volatility levels (red lines): the probable price range the pair will trade over the next 24 hours, based on current volatility indicators.

CCI Indicator: entering the oversold area (below -250) or the overbought area (above +250) signals an imminent trend reversal in the opposite direction.

The material has been provided by InstaForex Company - www.instaforex.com #

Forecast for GBP/USD on October 8, 2024

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On Monday, the British pound tried to break below the 1.3090 support level for the second time. However, the attempt failed on Friday, and the day closed above this level. Today began with growth, and the Marlin oscillator is slowly turning upward.

The next immediate goal for the price is to break through the 1.3141 resistance, just above which the MACD line is rising. Despite the price consolidating below the MACD line, further decline is unlikely due to the approaching Hurricane "Milton" in the U.S.

On the four-hour chart, the Marlin oscillator is close to entering the growth zone. Once it transitions, the pound may continue its rise with more confidence. However, the growth will likely be slow since, after overcoming 1.3141, the price will face another strong level at 1.3220, supported by a smaller-scale MACD line.

The material has been provided by InstaForex Company - www.instaforex.com #

Forecast for USD/JPY on October 8, 2024

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On Monday, the yen fell slightly short of reaching the target 149.38 (the August 15 peak) but accurately tested the 138.2% Fibonacci reaction level on the daily chart.

On the weekly chart, the price also worked through the 38.2% Fibonacci level at its intersection with the balance line. A price reversal is highly likely.

Thus, after the price consolidates below the 147.22 level, the target will open at the MACD line on the daily chart near the 76.4% Fibonacci level. The Marlin oscillator on the daily chart is turning around.

On the four-hour chart, the price slowly approaches the support at 147.22, with the Marlin oscillator approaching the border of the downtrend zone. After breaking the support and then the MACD line (146.60), the price will reach 145.00.

The material has been provided by InstaForex Company - www.instaforex.com #

Trading Recommendations and Analysis for GBP/USD on October 8; The Pound Sees No Reason for New Growth

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Analysis of GBP/USD 5M

On Monday, the GBP/USD currency pair traded with low volatility and showed minimal desire to correct. The British pound is gradually sliding downward, which is logical and expected. There were no significant events in the UK or the US on Monday, so the pound managed to avoid further decline this time. However, it's time for a slight upward correction. There will be very few major events this week, so volatility may remain low. Only on Thursday will the market closely watch the US inflation report, which could trigger strong market movements. On the other days, only secondary events are expected.

For the British pound, much now depends not only on the Federal Reserve's monetary policy and the market's expectations of it but also on the Bank of England's monetary policy. The British central bank currently sees no grounds for further rate cuts, and inflation in the UK may accelerate in the coming months. This fact prevents the heavily overbought pound from dropping further. It is worth noting that even after a 370-pip drop, the British currency remains overbought and unjustifiably expensive. Therefore, we are only expecting a decline from it. Perhaps the market is waiting for a "wake-up call" from the BoE.

On Monday, despite the low volatility, two sell signals were generated. First, the pair consolidated below the 1.3119 level and then bounced off it from below. Later, during the European trading session, the price dropped to 1.3060, narrowly missing the target level of 1.3050. However, traders had ample time to close their short positions with profit.

COT Report:

COT reports on the British pound show that in recent years, commercial traders' sentiment has been constantly changing. The red and blue lines, representing the net positions of commercial and non-commercial traders, frequently cross and are mainly near the zero mark. We also see that the last downward trend occurred when the red line was below zero. The red line is above zero, and the price has broken through the important level of 1.3154.

According to the latest report on the British pound, the non-commercial group opened 6,100 BUY contracts and closed 600 SELL contracts. As a result, the net position of non-commercial traders increased by 6,700 contracts over the week. The British pound continues to be bought up by market participants.

The fundamental backdrop still does not justify long-term purchases of the British pound, and the currency has real chances of resuming the global downward trend. However, on the weekly time frame, we have a formed ascending trendline, so until it is breached, a long-term decline in the pound is unlikely. The pound sterling is rising despite almost everything, and even when COT reports show that major players are selling the pound, it continues to rise.

Analysis of GBP/USD 1H

The GBP/USD pair continues to decline firmly in the hourly time frame. The upward trend has been canceled, and now only a solid and prolonged fall in the British currency is expected. Of course, the market may still resume baseless purchases of the British currency, but let us remind you once again—there are no fundamental or macroeconomic reasons for this. Thus, as before, we favor only downward movement, but the pair may correct upward during the current week.

For October 8, we highlight the following important levels: 1.2796-1.2816, 1.2863, 1.2981-1.2987, 1.3050, 1.3119, 1.3175, 1.3222, 1.3273, 1.3367, 1.3439. The Senkou Span B (1.3334) and Kijun-sen (1.3180) lines can also serve as signal sources. The Stop Loss level is recommended to be set to break even once the price moves 20 pips in the intended direction. The Ichimoku indicator lines may shift during the day, which should be considered when determining trading signals.

No crucial events or reports are scheduled for Tuesday in the UK or the US. Volatility may again be low, but overall, a correction is possible this week, at least until Thursday, when the US Consumer Price Index will be released.

Explanation of Illustrations:

Support and resistance levels: thick red lines where price movement may end. They are not sources of trading signals.

Kijun-sen and Senkou Span B lines: lines of the Ichimoku indicator transferred to the hourly time frame from the 4-hour chart. These are strong lines.

Extreme levels: thin red lines from which the price has previously bounced. They serve as sources of trading signals.

Yellow lines: trend lines, trend channels, and other technical patterns.

Indicator 1 on the COT charts: shows the net position size of each trader category.

The material has been provided by InstaForex Company - www.instaforex.com #

Trading Recommendations and Analysis for EUR/USD on October 8; A Dull Monday for the Euro

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Analysis of EUR/USD 5M

The EUR/USD currency pair was almost immobilized throughout Monday. We observed a total low-volatility flat market. Even the retail sales report from the Eurozone, which came in stronger than expected, did not help the euro recover even slightly after a week of decline. From this, we see, first of all, a positive signal and, secondly, an important fact. The signal is that the market is ready to continue moving downward. The dollar is so oversold and the euro so overbought that even positive macroeconomic data from the Eurozone cannot trigger a rise in the pair. In our opinion, this reflects the ultimate fairness.

Let's remember that the dollar has been falling for two years now, and it is difficult to answer why it has been declining for so long. The market was thoroughly preparing for the start of a monetary policy easing cycle. However, that cycle has already begun, so there is no reason for the dollar to continue falling, at least against the euro, whose European Central Bank is preparing to accelerate the monetary policy easing process. Therefore, a short-term upward correction is possible, with a U.S. inflation report ahead, but in the medium term, we still expect a decline down to price parity.

On Monday, there were no trading signals in the 5-minute time frame. The price didn't even come close to the levels of 1.1006 and 1.0935 during the day, so there were no grounds for opening trades.

COT Report:

The latest COT report is dated October 1. The illustration above clearly shows that the net position of non-commercial traders has remained bullish for a long time. The bears' attempt to gain dominance failed miserably. The net position of non-commercial traders (red line) decreased in the second half of 2023 and the first half of 2024, while the position of commercial traders (blue line) increased. Currently, professional players are once again increasing their long positions.

We still do not see any fundamental factors supporting the strengthening of the euro, and technical analysis indicates that the price is in a consolidation zone – simply put, a flat market. On the weekly time frame, it's visible that since December 2022, the pair has been trading between 1.0448 and 1.1274. In other words, we have moved from a seven-month to an 18-month flat.

The red and blue lines are diverging, indicating an increase in long positions on the euro. However, such changes cannot serve as a basis for long-term conclusions within a flat market. During the last reporting week, the number of long positions in the non-commercial group decreased by 9,500, while the number of short positions increased by 6,800. Accordingly, the net position decreased by 16,300. The potential for a decline in the euro remains quite significant.

Analysis of EUR/USD 1H

In the hourly time frame, the pair still has real chances to end the unjustified uptrend that has been ongoing for two years. There's no point in discussing the fundamental or macroeconomic reasons for a possible new dollar decline – they don't exist. Technical analysis has also turned in favor of the downward direction. Of course, the two-year uptrend may continue for some time due to momentum, but we expect nothing but a decline in the medium term.

For October 8, we highlight the following levels for trading: 1.0658-1.0669, 1.0757, 1.0797, 1.0843, 1.0889, 1.0935, 1.1006, 1.1092, 1.1147, 1.1185, 1.1234, 1.1274, as well as the Senkou Span B line (1.1130) and the Kijun-sen line (1.1017). The Ichimoku indicator lines may shift during the day, which should be considered when determining trading signals. Remember to set the Stop Loss order to break even if the price moves 15 pips in the intended direction. This will protect against potential losses if the signal turns out to be false.

There are no significant events or reports scheduled in either the Eurozone or the US on Tuesday. Thus, the flat market may persist, but the pair may still be inclined toward an upward correction for technical reasons.

Explanation of Illustrations:

Support and resistance levels: thick red lines where price movement may end. They are not sources of trading signals.

Kijun-sen and Senkou Span B lines: lines of the Ichimoku indicator transferred to the hourly time frame from the 4-hour chart. These are strong lines.

Extreme levels: thin red lines from which the price has previously bounced. They serve as sources of trading signals.

Yellow lines: trend lines, trend channels, and other technical patterns.

Indicator 1 on the COT charts: shows the net position size of each trader category.

The material has been provided by InstaForex Company - www.instaforex.com #

Forecast for AUD/USD on October 7, 2024

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On Friday, the price broke below the support level of 0.6827, and the daily Marlin oscillator consolidated in the downtrend territory. This allows the price to reach the MACD line in the coming days.

If this does not happen and the price climbs back above the 0.6827 level, the MACD line might remain untested, and a target of 0.6933 will open.

On the four-hour chart, the price consolidated below the 0.6827 level. Marlin is in the bearish zone but is turning upward. The probability of growth is 35%, but the dominant daily trend increases the likelihood of growth to 55%.

The material has been provided by InstaForex Company - www.instaforex.com #

EUR/USD. Weekly Preview. Inflation, Inflation, and More Inflation

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By the end of last week, the EUR/USD pair consolidated within the 1.09 range but could not test the support level of 1.0930 (the lower boundary of the Kumo cloud on the D1 time frame). Breaking through this price barrier will allow EUR/USD sellers to target the 1.08 range, with the first goal being 1.0850 (the upper boundary of the Kumo cloud on the weekly chart). The current fundamental backdrop generally supports a further price drop, but the development of the downward trend hinges on U.S. inflation data, the September value of which we will learn at the end of next week.

Over the previous two weeks, the EUR/USD pair traded in a wide price range of 1.1080-1.1190. Buyers attempted to push into the 1.12 range, while sellers aimed to settle within the 1.10 range. However, both buyers and sellers returned to the price range empty-handed.

The dollar's key factor was the Nonfarm Payrolls report, which showed a decrease in unemployment, an increase in employment, and faster wage growth. This report ended discussions on whether the Federal Reserve would lower interest rates by 25 or 50 basis points. The likelihood of a 50-point rate cut dropped to zero, while the probability of a 25-point cut rose to 97%. Additionally, the market now considers a 3% chance that the Fed might not cut the rate at its next meeting.

Thanks to the Nonfarm Payrolls, EUR/USD sellers managed to shift to a lower price level and consolidate within the 1.09 range. If the upcoming inflation data also supports the dollar, we could see a trend reversal after three months of growth (from 1.0710 in early July to a target of 1.1215 in September).

The most significant macroeconomic report of the week will be released on Thursday, October 10. According to preliminary forecasts, September's overall Consumer Price Index (CPI) is expected to slow to 2.3% year-on-year. The index has declined for the past five months, and September should mark the sixth consecutive drop. A "2.3%" result would be the lowest since February 2021. The Core CPI, which excludes food and energy prices, is also expected to show a downward trend, falling to 3.1% year-on-year. For the past two months (July and August), the Core CPI has been at 3.2%, but it is expected to decrease in September. If the indicator comes in at the forecasted level, it will hit a multi-month (or rather, multi-year) low, reaching its lowest point since March 2021.

The next day, on October 11, the U.S. will release the Producer Price Index (PPI) for September, which is also expected to show a downward trend. The overall PPI is forecasted to be 1.3% year-on-year, marking the weakest growth rate since January. The index has been declining for the past two months. The Core PPI is expected to come in at 2.0%, down from 2.4% in August. The forecasted result would be the weakest since January.

Most experts are confident that the September CPI and PPI will reflect a further slowing of inflation in the U.S. Does this mean that the 50-basis-point scenario for the November meeting will be back on the agenda? In my opinion, no. In that case, the probability of a 25-basis-point rate cut in November will rise to 100%, but the market is unlikely to return to discussing more aggressive scenarios. Many Fed members, before the release of the Nonfarm Payrolls, considered aggressive monetary easing in the event of a "cooling" labor market. However, the 250,000 increase in jobs in September has neutralized those concerns, so the Fed can proceed gradually without sharp 50-basis-point moves. Moreover, some members of the U.S. central bank are directly opposed to aggressive rate cuts (for example, Michelle Bowman, who in September voted for a 25-point cut rather than a 50-point one).

However, if the pace of inflation decline slows down (especially if inflation starts to accelerate again), different processes will be triggered. The 3% chance of maintaining the status quo in November could expand to 10-20%. The market will begin to consider this scenario, which alone will be enough to provide additional support for the dollar. Therefore, if the data on the CPI and PPI show "green" results, we may witness another dollar rally.

For the EUR/USD pair, this would mean that the pair will break through the support level at 1.0930 and attempt to settle within the 1.08 range. If inflation predictably decreases (or comes in "red"), a corrective pullback is likely (the resistance level is at 1.1030, which is the middle line of the Bollinger Bands on the H4 timeframe), but the pair will remain under pressure. In other words, any corrective upward moves should be used to enter sell positions.

Of course, the economic calendar for the upcoming week includes more than just inflation reports. For example, on Monday, speeches are expected from members of the Fed (Michelle Bowman and Neel Kashkari) and the European Central Bank (Philip Lane and Piero Cipollone). On Tuesday, we will hear positions from Adriana Kugler, Raphael Bostic, Susan Collins, Alberto Musalem (Fed), and Joachim Nagel (ECB). On Wednesday, the minutes from the Fed's September meeting will be published, and several Fed representatives (Philip Jefferson, Lorie Logan, Austan Goolsbee, Thomas Barkin) will also give speeches. Aside from the U.S. CPI, the minutes from the ECB's September meeting and the weekly report on initial jobless claims will be released on Thursday. Mary Daly and John Williams (Fed) speeches are also expected on Thursday. The University of Michigan's Consumer Sentiment Index and the PPI will be published on Friday.

However, all these events will remain overshadowed by the inflation reports, which will have the most substantial impact on the U.S. dollar and, consequently, on all major dollar pairs.

The material has been provided by InstaForex Company - www.instaforex.com #

Trading Recommendations and Analysis for EUR/USD on October 4; The ISM Index Helps the Dollar Gain a Bit More

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Analysis of EUR/USD 5M

On Thursday, the EUR/USD currency pair continued its downward movement. Volatility decreased slightly compared to Monday and Tuesday, but overall, it remains acceptable. The U.S. dollar has been rising for five consecutive days, something that hasn't happened for a long time. However, fortune has been on the side of the American currency this week. We've already mentioned that almost all macroeconomic data and the fundamental backdrop supported the growth of the U.S. dollar this week. The market, for once, didn't ignore all these factors. The only negative report was the ISM manufacturing sector activity index, which fell short of forecasts and remained below the "waterline" of 50.0.

Thus, the upward trend has ended, and the price continues to decline. Of course, today's labor market data could again spoil the picture for the dollar. Remember that the ADP report never correlates with NonFarm Payrolls, so it can't be used to predict NonFarms. Today, the unemployment rate and NonFarm Payrolls could again come in weaker than expected, increasing market expectations of a 0.5% rate cut by the Federal Reserve in November. This, in turn, could trigger a dollar selloff. However, the dollar can't fall forever, either. It's time for it to build "its own trend."

There is nothing significant to highlight from Thursday's trading signals, as the price approached the 1.1006 level only once during the day but failed to work through it. Thus, there were simply no signals to open trades. The ISM services activity index performed well but wasn't enough to outperform the 1.1006 level.

COT Report:

The latest COT (Commitment of Traders) report is dated September 24. The illustration above clearly shows that the net position of non-commercial traders has remained bullish for a long time. The bears' attempt to gain dominance was a resounding failure. The net position of non-commercial traders (red line) declined in the second half of 2023 and the first half of 2024, while commercial traders (blue line) increased. Currently, professional traders are once again building up long positions.

We still do not see any fundamental factors for strengthening the euro, and technical analysis suggests that the price is in a consolidation zone – in simpler terms, a flat market. On the weekly time frame, it's visible that since December 2022, the pair has been trading between 1.0448 and 1.1274. In other words, we have moved from a 7-month flat market to an 18-month one.

The red and blue lines are diverging at the moment, indicating an increase in long positions for the euro. However, such changes cannot be the basis for long-term conclusions within the flat market. During the last reporting week, the number of longs in the non-commercial group increased by 5,500, while the number of shorts grew by 3,500. Consequently, the net position increased by 2,000. The potential for a decline in the euro currency remains.

Analysis of EUR/USD 1H

In the hourly time frame, the pair still has a real chance to end the two-year unjustified upward trend. There is no point in discussing the fundamental and macroeconomic reasons for another potential dollar fall—they simply don't exist. Technical analysis has also shifted in favor of a downward direction. Of course, the two-year upward trend may continue for some time due to momentum, but we expect nothing but a decline in the medium term.

For October 4, we highlight the following levels for trading: 1.0658-1.0669, 1.0757, 1.0797, 1.0843, 1.0889, 1.0935, 1.1006, 1.1092, 1.1147, 1.1185, 1.1234, 1.1274, as well as the Senkou Span B line (1.1141) and the Kijun-sen line (1.1108). The Ichimoku indicator lines may shift throughout the day, so this should be considered when identifying trading signals. Remember to set a Stop Loss order at break even if the price moves 15 pips in the intended direction. This will protect against potential losses if the signal turns out to be false.

On Friday, no significant events are scheduled in the Eurozone, but in the U.S., the "reports of the week" — NonFarm Payrolls and the unemployment rate — will be released. These two reports could easily undo all the U.S. dollar's progress this week. However, it's worth noting that these reports have consistently fallen short of forecasts over the past 4-5 months. But that can't last forever, either.

Explanation of Illustrations:

Support and resistance levels: thick red lines where price movement may end. They are not sources of trading signals.

Kijun-sen and Senkou Span B lines: lines of the Ichimoku indicator transferred to the hourly time frame from the 4-hour chart. These are strong lines.

Extreme levels: thin red lines from which the price has previously bounced. They serve as sources of trading signals.

Yellow lines: trend lines, trend channels, and other technical patterns.

Indicator 1 on the COT charts: shows the net position size of each trader category.

The material has been provided by InstaForex Company - www.instaforex.com #

GBP/USD. Andrew Bailey and the Pound's Collapse

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The pound is plummeting across the market. In its pair with the dollar, the British currency has dropped by more than 150 pips in just a few hours. At the start of the European session on Thursday, the GBP/USD pair updated its local high at the 1.3269 mark, but by now, the price has approached the base of the 31st figure. Notably, the pair is plunging not only (and not primarily) due to the strengthening of the greenback but also the weakening of the pound. Look at the major cross pairs involving the British currency— the pound is losing ground rapidly even in pairs with the yen and the euro, both of which have been under pressure recently.

The reason for this is the Governor of the Bank of England, Andrew Bailey. In an interview with The Guardian, he announced a rate cut at the next meeting. According to him, the BoE will likely resort to more aggressive monetary easing "if inflation continues to show signs of slowing." Additionally, Bailey highlighted the resilience of the national economy, stating that the UK has weathered the shocks of the past five years "much better than many of us feared." Following these comments, the pound fell by more than 1% against the euro and the dollar.

Bailey's rhetoric on Thursday has triggered significant volatility, mainly because the outcome of the September meeting was fairly cautious. The number of members voting for a rate cut dropped to just one. Commenting on the BoE's cautious stance, the governor said that the central bank would need "further evidence" for the next step in monetary policy easing. Specifically, there is evidence that inflationary pressure is weakening and the national economy is growing.

The latest inflation report reflected stagnation in overall inflation (which remains above the target level) and an acceleration in core inflation. The only downward trend was seen in the Retail Price Index (RPI), which employers use in wage discussions. It came in at 3.5% after rising to 3.6% the previous month. However, this indicator remains near multi-month highs.

As a result, Bailey's statements came as a cold shower for GBP/USD traders. Essentially, for the first time, the head of the BoE mentioned the possibility of aggressive policy easing despite the central bank declaring a moderate pace of easing at the September meeting. Some experts had previously believed the Bank would reduce the rate no more than once per quarter. Now, analysts will have to revise their forecasts, primarily if the September inflation report for the UK (due on October 16) reflects a slowdown in CPI. The next BoE meeting will occur on November 7, making this inflation report the last one before the November meeting. The importance of this release cannot be overstated—it will essentially be the deciding factor for the BoE's decision.

The probability of a 25-basis point rate cut by the BoE next month is estimated at 70%, and the likelihood of a similar rate cut at the December meeting is 40%. Amid growing dovish expectations, the pound has come under significant pressure.

The GBP/USD pair faced additional pressure from a study published on Thursday. It showed that the CPI inflation expected by British companies for the quarter ending in September decreased by another 0.1 percentage point. This survey is quite important for the BoE's leadership and could also play a role in determining monetary policy parameters.

Moreover, the downward trend in GBP/USD is also driven by the rise of the U.S. dollar index, which reached a three-week high on Thursday, hitting 101.70. The U.S. dollar is appreciating on the back of strong U.S. labor market reports (JOLTS and ADP) and the rising oil market, which is reacting to the escalation in the Middle East. This information backdrop has influenced market expectations regarding the Federal Reserve's future actions. According to the CME FedWatch tool, the probability of a 25-basis point rate cut has increased to 67%. Meanwhile, the likelihood of a 50-basis point rate cut is now estimated at 33%, compared to 50-55% just last week.

Therefore, considering the current fundamental picture for the GBP/USD pair, short positions are favored, with the first target at 1.3040.

From a technical perspective, the pair has impulsively broken through the support level at 1.3230 (the middle line of the Bollinger Bands indicator, coinciding with the Kijun-sen line on the daily chart) and has currently dropped to the base of the 31st figure, positioned between the middle and lower Bollinger Bands lines, below the Tenkan-sen and Kijun-sen lines but above the Kumo cloud. The nearest target for the downward movement is the 1.3040 level – the upper boundary of the Kumo cloud on the D1 time frame. The main target is 1.2940 (the lower boundary of this cloud).

The material has been provided by InstaForex Company - www.instaforex.com #