Figure 3: The GBP and COT positions of large speculators on a weekly chart
The total net positions of the big speculators in the pound are currently in the bearish zone. The bearish sentiment is probably the result of uncertainty about the further development of the Brexit agreement with the EU. Last week, the bearish total net position was further increased by 6,500 contracts. However, the decline in positions has not been reflected in the price of the pound yet. Nevertheless, the pound is approaching the level of resistance, on which the price reacted before and bounced downwards. Similar reaction may happen on this level again.
A key meeting on Brexit should take place this week. There will be a video conference of EU leaders on 19 November 2020, and next week the European Parliament should ratify the agreement with Britain if the negotiators on both sides agree on it. If it is clear that the Brexit agreement between the EU and Britain will not be negotiated, the pound will most likely fall down.
Note: we have plotted inflection points in the graph and it can be seen that in some cases the price development did not react according to sentiment. For example, in segment D, where we can notice that although the total net positions were in bullish territory, i.e. that long contracts prevailed, but the price fell down. In this case, it happened that the total net positions at that time were in extreme value, for which the trend may reverse. In addition, the price reached previous resistance.
Long-term resistance: 1.33-1.35. But here the price has been tested 3 times.
Long-term support: 1.2650-1.2750
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