Trading opportunities on the currency pair: Since the 20th of September, the British pound has shed around 600 pips against the US dollar. The drop started with a pin bar model. From looking at the cycles, I’m expecting the rate to drop to the TR2 trend line or the range from 1.3000 to 1.3016, followed by a recovery to 1.3350 – 1.3490. We should keep the 21st of October and 29th of November in mind for possible reversal dates. From the trend line, I’ll start trying to trade with the trend with targets of 1.3350 and 1.1390. After the 28th of November, I’m expecting a downwards reversal and a breakout of the TR2 trend line.
Background
The last idea on the GBPUSD currency pair was published on the 29th of May. At the time of writing, one British pound was trading for 1.2805 USD. After the UK’s GDP figures for the first quarter were revised downwards, the pound dropped to 1.2775, breaking through the lower boundary of the A-A channel and the TR trend line. In my forecast, I was expecting the rate to drop to 1.2643 in time for the FOMC meeting (13th- 14th of July). It didn’t happen quite the way I expected, but the rate fell to 1.2635 by the 14th of July. After the FOMC meeting, the bullish trend was restored from 1.2589 with renewed strength.
Fig 1. Daily chart. Source: TradingView
According to the latest COT (Commitments of Traders) report, which was published on Friday by the CFTC, large speculators have cashed in on their long and short positions.
Large speculators (Non-commercial): long positions have been reduced by 1,507 to 76,958 contracts, while short positions have dropped by 17,000 to 59,167 contracts. Net long positions for the week increased by 2,216 to 15,573 contracts.
Small speculators (Non-reportable positions): long positions increased by 2,395 to 39,650 contracts. Short positions fell by 435 to 27,695 contracts. Net long positions increased by 2,825 to 11,950 contracts.
