GBP/USD 5M
The GBP/USD pair surprisingly traded clearly on March 4, from a technical point of view. The market was nearly flat during the evening, as it often happens, and volatility was below the floor. No wonder. The market began to slightly swing from side to side as the European trading session opened, but it did not generate any signals, since the price did not approach any important level or line. Hopes were on macroeconomic publications and the fundamental background. The first report was published in the morning in the UK - the index of business activity in the construction sector rose from 49.2 to 53.3, which provoked a systematic strengthening of the British pound, which lasted all day, until Federal Reserve Chairman Jerome Powell's speech. Unfortunately, this report did not enable the pair to create a signal, so traders had no reason to work out this movement. But the price moved near the 1.3998 level in the evening, which is when Powell's speech began. According to our recommendations, a rebound or overcoming should be expected from this level. As a result, the first happened - the fundamental event is marked with the number 3 - as a result, the bears began to put pressure on the pound/dollar pair, which led to its significant fall for the rest of the day. Markets heard Powell's statements, as he ensured that inflation will not go above 2% in the long term. It is not yet clear in what ways the Fed will restrain inflation, but traders have calmed down about this and Treasury yields may stop growing following Powell's speech. A sell signal could have started to work out somewhere at the 1.3975 level. As a result, the quotes dropped to the first target of 1.3885, bringing traders' profit of about 90 points. The main thing is that the signal turned out to be strong and unambiguous, and it also coincided with an important fundamental event, which only strengthened it.
GBP/USD 1H
You can see that the pound/dollar pair is in a downward movement on the hourly timeframe, but the trend is not identifiable now. There is no trend line or channel. The bulls could not overcome the 1.3998 level for the third time, so recommencing the upward trend is postponed for now. At the same time, the bears also cannot pull down the pair even further. There is a kind of flat. If so, rebounding from 1.3857 or 1.3885 may provoke a new round of upward movement with targets on the Kijun-sen line and the 1.3998 level. There are no major events or publications scheduled in the UK to date. Therefore, you should focus on US reports, which will be published in the afternoon. The most important report - Nonfarm Payrolls - may disappoint traders once again, as the previous ADP report turned out to be weaker than forecasts. On signals - as usual - we work on a rebound or once important lines, levels, areas have been overcome. Take note that the 5-minute timeframe exists to clarify the technical picture of the higher frame. Signals should be monitored on it. When generating a signal and opening deals, you should clearly work with the Stop Loss, setting it to breakeven after passing 15-20 points in the right direction.
We also recommend that you familiarize yourself with the forecast and trading signals for the EUR/USD pair.
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.
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