Trading Recommendations and Analysis of GBP/USD on October 17. Inflation Creates Additional Challenges for the Pound

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Analysis of GBP/USD 5M

The GBP/USD currency pair sustained its decline on Tuesday without even attempting to start a correction. Yesterday, the UK released its inflation report for September, and all the figures came in below forecasts. What does this mean? Simply put, inflation is falling faster than Andrew Bailey feared. Moreover, the core inflation rate is now at 1.7%. We previously mentioned that the Bank of England might be concerned about core inflation and inflation in the services sector. However, the central bank cannot ignore the drop in headline inflation. If the BoE waits for problem areas of inflation to decrease by another 1.0–1.5%, headline inflation, and inflation in the manufacturing sector could reach zero or even negative levels. And how do you balance all types of inflation, then?

We believe the BoE needs to lower rates as quickly as possible, perhaps even in 0.5% steps. It seems the market also understands this, having long praised the resilience of the British economy during challenging monetary times. However, the UK economy has grown only for appearance's sake, and inflation is rapidly approaching zero. It looks like the BoE has delayed easing monetary policy as well. So, the fact that the pound is falling doesn't surprise us. We believe that the fair value of the pound against the U.S. dollar is around $1.20.

Yesterday, two trading signals were formed in the 5-minute time frame. First, the pair broke below the Kijun-sen line and the 1.3050 level, though technically, this signal was complex to capitalize on. The pound should have been sold immediately after the inflation report was released, as it didn't suggest any other course of action. Later, the price bounced off the 1.2981-1.2987 area, allowing for long positions to be opened. Both trades ended in profit.

COT Report:

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

According to the latest COT report on the British pound, the non-commercial group opened 6,100 new 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 a real chance of resuming a global downward trend. However, on the weekly time frame, we have an ascending trend line, so until it is broken, we cannot expect a long-term decline in the pound. The pound has been rising despite almost everything, and even when COT reports show that large players are selling it, it still rises.

Analysis of GBP/USD 1H

The GBP/USD pair continues to decline in the hourly time frame. The upward trend has been canceled, and now only a significant and prolonged fall of the British currency should be expected. Of course, the market might resume unjustified purchases of the British pound, but let's reiterate—there are no fundamental or macroeconomic reasons for such actions. Therefore, we continue to support the downward movement, but the pair may correct upward in the near future. For this to happen, the price must at least consolidate above the trendline.

For October 17, 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, and 1.3439. The Senkou Span B line (1.3205) and the Kijun-sen line (1.3040) can also serve as signal sources. It is recommended to place the Stop Loss at break even when the price moves 20 pips in the intended direction. The Ichimoku indicator lines may shift throughout the day, so this should be considered when determining trading signals.

No important reports are scheduled in the UK on Wednesday, while three minor reports will be released in the US. Industrial production and retail sales can be given attention, but these data are unlikely to provoke a strong market reaction.

Explanation of Illustrations:

Support and Resistance Levels: Thick red lines near which price movement may end. They are not sources of trading signals.

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

Extremes 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 any other technical patterns.

Indicator 1 on COT charts: The size of the net position for each category of traders.

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Trading Recommendations and Analysis of EUR/USD on October 17. The Euro Sees No Reason to Stop

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Analysis of EUR/USD 5M

On Tuesday, the EUR/USD currency pair continued its near-freefall. We believe the nature of the current movement is very symbolic and accurately reflects the market sentiment. What does this daily decline in the euro mean? It signifies that market participants are selling the euro daily. Essentially, the euro is being sold for any reason, or no reason at all, just as the U.S. dollar was previously discarded. We repeatedly warned that the euro was overbought and unjustifiably expensive. We also warned that buying the euro simply because everyone else was doing it was illogical. We mentioned that there would come a time when the euro would fall daily, just as it had previously risen. Furthermore, we pointed out that the decline in the euro could start after September 18, when the Federal Reserve officially began its monetary easing. This is because the market had been pricing in the future rate cut from the Fed for two years, and once it started, there were no further factors to sell the dollar.

Thus, we now witness the daily decline of the euro, which could continue for a long time. Today, the European Central Bank will announce the results of its meeting, and no one doubts that rates will be cut for the third consecutive time, which means more aggressive easing than the Fed. However, the market had only been pricing in the Fed's rate cuts! Now, it must account for the ECB's cuts, which had been lower throughout the hawkish cycle.

Despite the pair's daily decline, it's challenging to capitalize on these moves in lower time frames due to low volatility. Therefore, trades must be held for several days or executed in higher time frames. The current movements are too weak for intraday trading. Most of the day is spent in a flat range, followed by a downward course for several hours.

COT Report:

The latest COT report is dated October 1. As shown in the illustration, the net position of non-commercial traders has long been in the bullish zone. The bears' attempt to gain dominance failed spectacularly. The net position of non-commercial traders (red line) decreased in the second half of 2023 and early 2024, while commercial traders' (blue line) positions were growing. At the moment, professional traders are once again increasing their long positions.

We still don't see any fundamental factors supporting the strengthening of the euro, and technical analysis shows that the price remains in a consolidation zone or flat. On the weekly time frame, it's evident that since December 2022, the pair has been trading between levels 1.0448 and 1.1274. In other words, we have moved from a seven-month flat into an 18-month flat.

The red and blue lines are diverging, indicating an increase in long positions on the euro. However, within the context of a flat, such changes cannot form the basis for long-term conclusions. In the most recent reporting week, long positions for the non-commercial group decreased by 9,500, while short positions increased by 6,800. Accordingly, the net position fell by 16,300. The potential for a decline in the euro remains strong.

Analysis of EUR/USD 1H

The pair continues its downward movement on the hourly time frame, which may begin a new long-term bearish trend. There's no point in discussing fundamental or macroeconomic reasons for a possible new dollar decline — they don't exist. In the medium term, we expect nothing but further decline. In the short term, a correction is possible, but for this to happen, the price needs to consolidate above the trend line.

For October 17, we highlight the following trading levels — 1.0658-1.0669, 1.0757, 1.0797, 1.0843, 1.0889, 1.0935, 1.1006, 1.1092, 1.1147, 1.1185, 1.1234, and also the Senkou Span B line (1.1083) and the Kijun-sen line (1.0942). The Ichimoku indicator lines may shift throughout the day, which should be considered when identifying trading signals. Don't forget to set a Stop Loss order to break even if the price moves 15 pips in the intended direction. This protects against potential losses if the signal turns out to be false.

The ECB meeting results will be announced on Wednesday, and a press conference with Christine Lagarde will follow. This is the day's most important event, and the future of the euro will depend on Lagarde's statements. In the U.S., less significant reports on retail sales, industrial production, and jobless claims will be published.

Explanation of Illustrations:

Support and Resistance Levels: Thick red lines near which price movement may end. They are not sources of trading signals.

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

Extremes 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 any other technical patterns.

Indicator 1 on COT charts: The size of the net position for each category of traders.

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Forecast for EUR/USD on October 16, 2024

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On Tuesday, following the record high set by the S&P 500 stock index on Monday, there was a pullback of 0.76%. Oil prices dropped by 3.75%, and 5-year U.S. Treasury bonds yield decreased to 3.85%. Against this backdrop, the euro naturally fell by 15 pips, with the lower shadow testing the target support level of 1.0882. It seems that the spectacular speculative reversal we anticipated around the European Central Bank meeting for over a week may not happen. However, at the same time, the likelihood of a stock market crash, which could pull everything else down with it, has significantly increased. The first large, obvious target for the S&P 500 appears to be at 5392, corresponding to the low of July 25, close to the September low, and coinciding with a 61.8% correction from the August 5 rally (-7.3%).

On the daily chart, if the euro consolidates below the 1.0882 level, the target of 1.0777 (the August 1 low) will open up. This plan, however, needs to be supported by tomorrow's ECB meeting. If, as business media reports, the market has already priced in a 0.25% rate cut, there may be a slight upward correction, but after that, we expect the euro to continue falling.

On the four-hour chart, the Marlin oscillator has established a short-term downtrend in negative territory. The price is steadily declining below both indicator lines. We are still determining how strongly the ECB's outcomes might disrupt this trend, but the market itself is only reinforcing this downward tendency day by day.

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Forecast for USD/JPY on October 16, 2024

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The USD/JPY pair attempted to break above the 149.38 level over the past two days, but instead, a slight double divergence formed with the Marlin oscillator on the daily chart. Currently, the price is attempting to develop a decline below the 149.38 level.

If our assumption about a significant reversal in the stock market is correct, the pair will move towards the target range of 139.70-140.27. For now, the nearest target is 147.22. Consolidating below this level will open the target at the MACD line (144.33), which is getting closer to the second target of 143.60.

The price has consolidated below the MACD line and the 149.38 level on the four-hour chart. It now just needs to consolidate below the balance line. The Marlin oscillator has settled below the boundary of the downtrend territory. The nearest target, 147.22, is nearly within reach.

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Video analysis for October 15, 2024

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Potential for the further drop on EUR/USD

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Technical Analysis of Intraday Price Movement of EUR/JPY Cross Currency Pairs, Tuesday October 15, 2024.

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If we look at the 4-hour chart of the EUR.JPY cross currency pair, it seems that there is a deviation between the price movement of this currency which forms a Triple Top while the MACD indicator actually forms a Higher-Low so that in the near future EUR/JPY has the potential to weaken and will test the level of 162.27 if this level is successfully broken and closes below it, then as long as there is no further strengthening that breaks and closes above the level of 163.38, EUR/JPY will continue to weaken to the level of 160.94 and if the momentum and volatility support it, the level of 158.73 will be the next target to be aimed for.

(Disclaimer)

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Technical Analysis of Intraday Price Movement of Silver Commodity Asset, Monday October 14, 2024.

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If we look at the 4-hour chart of the Silver commodity asset, it appears that there is a deviation between the movement of the Silver price and the Stochastic Oscillator indicator, indicating a potential weakening that will occur in the near future in Silver where this commodity asset will try to test its closest support level, namely at 30.304. If this level is successfully broken and Silver successfully closes below that level, then Silver has the potential to continue its weakening to the level of 29.045 as its main target and if the momentum and volatility support it, then 27.930 will be the next target to be aimed for, but all of these scenarios will be invalid and automatically canceled if on its way to the target levels, Silver suddenly turns around and rises to break and close above the level of 33.146.

(Disclaimer)

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Forecast for AUD/USD on October 11, 2024

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The Australian dollar became tired of waiting for a reversal from the euro and the pound and decided to take the lead itself. This decision was bolstered by the recovery in commodity markets. Currently, the price is testing the resistance level defined by the daily balance indicator line. The MACD line is slightly higher (0.6775), and a break above this level would set a target of 0.6827.

Investors are anticipating new stimulus measures from China during the upcoming weekend. The Australian dollar may react to them with growth; the magnitude of this appreciation will depend on the specific measures implemented.

On the four-hour chart, the Marlin oscillator has settled in the zone of an upward trend. The price is consolidating before a potential breakout above 0.6775. The balance indicator line is also nearby.

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Technical Analysis of Intraday Price Movement of Ethereum Cryptocurrency, Friday October 11, 2024.

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Although on the 4-hour chart the Ethereum cryptocurrency is weakening which is confirmed by the occurrence of a Death Cross between the EMA 50 which is below the EMA 200, but the appearance of the Failing Wedge pattern gives us a clue that in the near future #ETH has the potential to strengthen up to the level of 2520.57 but as long as the strengthening does not continue to broken and close above the level of 2634.73 then it is only a momentary correction and Ethereum still has the potential to continue its weakening to the level of 2323.73 as its main goal and if the momentum and volatility support it then Ethereum will continue its weakening back to the level of 1930.06.

(Disclaimer)

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Trading Recommendations and Analysis for GBP/USD on October 10; US Inflation to Set a New Momentum

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Analysis of GBP/USD 5M

The GBP/USD currency pair continued to lean towards a decline throughout Wednesday. Once again, it failed to reach the nearest target of 1.3050, but in recent days, it's clear that the price no longer has the same momentum for a decline as it did last week. This is unsurprising, given that the macroeconomic background has been virtually absent this week. Representatives of the Federal Reserve (Fed) speak every day, and last night, the minutes of the previous meeting were released. However, no fundamentally new information reached the market. As a result, volatility this week has been extremely low, and market participants are openly waiting for the inflation report.

This report could show any result. It won't affect the dollar's medium-term prospects anymore. If inflation for September decreases more than the market expects, it could lead to the necessary upward correction in the EUR/USD and GBP/USD pairs, as the market would expect another 0.5% rate cut by the Fed in November. If inflation slows down less than expected, the dollar might strengthen a bit more, as expectations for a 0.5% rate cut at the next meeting will drop sharply. The Fed has yet to achieve complete victory over inflation.

From a technical perspective, the British pound may recover to the 1.3175 level in the near term. However, each trader must decide for themselves whether to buy a pair that is likely beginning a medium-term downtrend.

No trading signals were formed yesterday. The price only approached the 1.3050 level once but failed to reach it even with some deviation. Therefore, there were still no grounds for entering the market. Additionally, for most of the day, the pair remained sideways.

COT Report:

The COT reports on the British pound show that commercial traders' sentiment has been constantly changing in recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, frequently intersect and are mainly close to the zero mark. We also see that the last downward trend coincided with a period 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. Thus, the net position of non-commercial traders increased by 6,700 contracts over the week. Market participants continue to accumulate the British pound.

The fundamental backdrop still does not provide any grounds for long-term purchases of the British pound, and the currency itself has a real chance of resuming a global downtrend. However, on the weekly timeframe, we have an ascending trend line, so until it is broken, a long-term decline in the pound cannot be expected. The British pound rises against almost everything, and even when the COT reports indicate 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 we should expect only a further drop in the British currency, which could be both significant and prolonged. Of course, the market could still resume unfounded purchases of the British currency, but let's remember once more—there are no fundamental or macroeconomic reasons for this. Thus, as before, we support only the downward movement, although the pair may correct upward during the current week.

For October 10, 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 line (1.3261) and the Kijun-sen line (1.3114) may also serve as signal sources. Setting the Stop Loss level to break even if the price moves 20 pips in the intended direction is recommended. The lines of the Ichimoku indicator may shift throughout the day, so this should be considered when determining trading signals.

No significant events are scheduled for Thursday in the UK, while in the US, the key and essentially the only important report of the week—inflation—will be released. The reaction to this report is expected to be strong, as the market has been anticipating it all week.

Explanation of Illustrations:

Support and Resistance Levels: Thick red lines near which price movement may end. They are not sources of trading signals.

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

Extremes 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 any other technical patterns.

Indicator 1 on COT charts: The size of the net position for each category of traders.

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