GBP/USD 1H
The GBP/USD pair traded more calmly than the EUR/USD pair on Monday. Even a little strange, usually the opposite is true. However, the pair's quotes stopped near the 1.3903 level on Friday, the same level that held back the bears' attempts on Monday. Thus, we can talk about a more or less strong support level, and the pound may stop falling around this area. An important point - the euro has updated its lows on Friday, but the pound has not. Although, again, the pound is usually traded more actively, and the factors that provoked the strengthening of the dollar are the same for both major currency pairs. Thus, the pound shows its unwillingness to continue moving down and this moment may speak in favor of the upward trend that might resume in the coming days. Take note that the pound has grown by 40% in recent months without any reason. Simply put, the factors that were capable of causing the pound to rise were not strong enough for the currency to show uncorrected gains for five consecutive months. So now this movement may resume, as market participants continue to lean towards speculative purchases of this pair. Thus, the second rebound from the 1.3903 level may just provoke a new upward movement. In the last article, we recommended selling the pair if the price leaves the rising channel with targets at 1.3980 and 1.3951. These goals were reached, and the signal was clear and unambiguous, so traders could earn about 40 points of profit on it. You were advised to buy the pair in the event of a rebound from the lower channel line, which did not happen.
GBP/USD 15M
Both linear regression channels are directed to the downside on the 15-minute timeframe, but their slope has greatly decreased, which indicates a weakening of the downward momentum. Since there have already been two rebounds from the 1.3903 level, the chances for a round of upward movement are growing. This option is also supported by the speculative mood of market participants.
COT report
The GBP/USD pair rose by 150 points during the last reporting week (February 16-22). The last two Commitment of Traders (COT) reports have clearly signaled an increase in bullish sentiment among the "non-commercial" group of traders. Therefore, in general, the mood of the major players and what was happening in the market for the pair had coincided. Non-commercial traders opened a meager number of new contracts during the last reporting week. Only 1,000 Buy-contracts (longs) and 1,200 Sell-contracts (short). Thus, the net position for this group of traders has not changed, as well as the total number of open contracts. Consequently, there shouldn't have been any major changes in the market. Nevertheless, the pound continued to sharply rise, so we return to the hypothesis that the demand for the pound remains relatively high, but the high supply of the US dollar plays a big role in strengthening the pound, which is depreciating as a result. The COT reports do not take into account supply and demand for the dollar, therefore, if they significantly change in volumes, then this or that currency may move without correlating with COT reports for it. We see approximately the same picture for the pound. The first indicator does not show an unambiguous bullish sentiment all the time that is shown in the chart. The green and red lines constantly intersect and change the direction of movement, which indicates the lack of a clear strategy among professional traders. But the pound continued to steadily grow all this time.
The index of business activity in the manufacturing sector was published in the UK on Monday, which traders also ignored. At least, the index rose, but the pound only declined in the daytime. Also, the pound/dollar pair did not react in any way to reports from overseas. Thus, all of the macroeconomics from Monday were ignored.
There will be even less interesting macroeconomic and fundamental events for the pound/dollar pair on Tuesday. There won't be any at all. Thus, we will be able to see what traders really feel like. If the price surpasses the 1.3903 level, the bears will show that they are really ready to form a downward trend. Otherwise, the chances of resuming the upward trend will increase dramatically.
We have two trading ideas for March 2:
1) Bulls have released the initiative, but the bears have not yet managed to take the pair too far from the 2.5-year highs. Thus, the upward movement can resume at any time, despite the exit of quotes from the channel. We believe that it will be possible to buy the pair again if the price settles above the Senkou Span B line (1.4007) while aiming for the Kijun-sen line (1.4064) and the resistance level of 1.4145. Take Profit in this case can be up to 110 points.
2) Sellers pulled down the pair to the 1.3903 level, but now they also need to keep the price below the Senkou Span B line and overcome the 1.3903 level. And so you are advised to open short positions in the event of a price rebound from the Senkou Span B line (1.4007) or the 1.3998 level, or the Kijun-sen line (1.4064) while aiming for 1.3903 and 1.3792. Take Profit in this case can range from 130 to 230 points. You can open short positions if the price settles below the 1.3903 level.
Forecast and trading signals for EUR/USD
Explanations for illustrations:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the "non-commercial" group.
The material has been provided by InstaForex Company - www.instaforex.com