GBP/USD 5M
The GBP/USD pair was trading much more actively and sharper than the euro/dollar pair on Tuesday. An upward movement began at the beginning of the European trading session, but it ended very quickly, and instead the pair started to fall. Moreover, the downward reversal practically coincided with the publication of the package of macroeconomic reports in the UK (number 1 in the chart). This package included reports on unemployment (fell to 5.0%), the number of applications for unemployment benefits in February (increased by 86,000 instead of 9,000 forecast), as well as changes in the level of average earnings (figures were slightly worse than forecasted). Thus, in general, the reports can be characterized negatively. Therefore, the decline in quotes could have also been provoked by these reports. One way or another, the fall began, and the price settled below the 1.3830 level and it served as the first sell signal. The nearest target - the support level of 1.3786 - was immediately reached, and along with it the extremum level of 1.3776. Thus, traders could earn about 20-30 points of profit on the first sell signal. This was followed by a series of false signals, which were formed around the levels of 1.3776 and 1.3786. The first sell signal was supposed to close at the Stop Loss set at breakeven, the second and the third - brought a loss of about 20 points, since the price did not go up 15 points, therefore a zero Stop Loss was not set, then finally a correct signal was formed at sell, as the pair crossed the 1.3776 level again. This signal could have earned about 26 points, since the nearest target level of 1.3745 was reached. Thus, in general, traders today could stay with the low profit.
GBP/USD 1H
We can see on the hourly timeframe that the price continues to move down quite strongly and has also surpassed the previous local lows. Thus, if the euro/dollar pair continues to remain within the horizontal channel, then the pound has left its own and can now continue to form a new downward trend. The nearest target (1.3701) can be reached by tonight. In addition to the macroeconomic reports, which are listed in the article on the euro/dollar pair, the UK will also publish business activity indices in services and manufacturing for March, and all three are forecast above the level of 50.0, which may support the pound. Since they were below this level in February 2 out of 3. A report on inflation will also be published a little earlier, which may slightly accelerate in February, but in general should remain at a low value, below 1% y/y, according to analysts' forecasts. Therefore, bulls will obviously not have much reason for optimism. However, the British currency should have started a strong downward movement long ago. Perhaps this moment has come. In general, we continue to recommend trading from important levels and lines, when rebounding from them and overcoming them. As before, you should set the Stop Loss level at breakeven when the price passes 15-20 points in the right direction. The nearest level/line is always used as targets.
COT report
The GBP/USD pair rose by 75 points during the last reporting week (March 9-15). However, this growth is very conditional, since, as we have already mentioned, the last two weeks have been in absolute flat for the pound. As for the traders' sentiment, recently the "non-commercial" group continued to increase its net position, which testified to the strengthening of the bullish sentiment. It has only been bearish in the past two weeks, including the latest COT report that came out this Friday. A decline in the net position by 6,000 contracts was recorded a week ago, the new COT report showed a fall by another 6,500. Thus, one could even assume the end of the upward trend, however, pay attention to the movement of the first indicator in recent months. The green and red lines, which reflect changes in the net positions of the "non-commercial" and "commercial" groups of traders, constantly changed the direction of movement and were mostly near the level 0. This suggests that the mood of the major players was constantly changing, and the rate of the pound/dollar pair, meanwhile, moved for its own reasons. Thus, the current "signal" about the possible completion of an upward trend is likely to be false. We remind you that the pound is experiencing huge problems in order to show the downward movement. Markets are stubbornly reluctant to get rid of it, and global fundamentals may trigger a new round of the upward trend in the coming weeks.
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