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GBP/USD 1H
The GBP/USD pair made an impressive growth spurt on Wednesday, which is called out of the blue. Traders did not receive any extraordinary news during the day. In addition, the last round of growth also took place at night, when usually volatility decreases. Thus, the pound continues the hit parade of absolutely illogical movements that are very difficult to predict. We have already said that technical signals have often been false lately. Although yesterday the pair corrected to the critical line, so let's now hope that this line will allow us to form a new, clear signal that can be worked out. Despite the possibility that the price might settle below the critical line, the pair still remains within the rising channel, which means that the trend is to go up. Consequently, traders still need to monitor the formation of buy signals. In our last review, we advised you to buy the pair if it settles above the 1.4083 level. We called this signal fuzzy and weak, nevertheless, it was after it that the pair soared up by another 130-140 points. Therefore, traders could still earn at least 60 points on this signal. Yesterday, we advised you to not sell the pair (at least until the pair surpasses the rising channel), therefore, they should not have opened short positions. In general, the pound's prospects depend on the Kijun-sen line.
GBP/USD 15M
Both linear regression channels are still directed to the upside on the 15-minute timeframe, even though the pair previously fell by 160 points. Therefore, our short-term trend is still upward. We could not confidently overcome the Kijun-sen line, so the upward movement may resume with renewed vigor.
COT report
The GBP/USD pair rose by 160 points during the last reporting week (February 9-15). If in the last weekly reviews we said that the pound is gradually getting more expensive and "is not rushing headlong to the upside", now, perhaps, we can say that it is. The latest Commitment of Traders (COT) report for the pound was more or less neutral, however, the bullish sentiment is on the face. This is well signaled by the first indicator in the chart, the green and red lines of which have been moving away from each other in recent weeks. Over the last reporting week (recall that the COT report comes out with a three-day delay), a group of non-commercial traders opened 369 Buy-contracts (longs) and closed 3,300 Sell-contracts (short). Thus, the net position of non-commercial traders increased by almost 4,000. Consequently, major players became even more bullish. In total, professional traders have 62,000 buy contracts and 36,000 sell contracts open. That is, the difference is approximately one and a half times and it has become such in recent weeks. For the euro, for comparison, the difference is three times and the upward movement is much weaker. Thus, even the COT reports say that such a strong and almost recoilless strengthening of the pound is unreasonable. Nevertheless, the upward trend persists and, therefore, you can trade bullish.
The UK released its annual monetary policy report. According to this report, there is a high risk of increased unemployment in the UK if government support for low-income households ends. The Bank of England is still doing everything possible to reach the inflation target and market participants understand this. The Brexit trade deal has no direct impact on inflation. According to the Bank of England, the last strongest strengthening of the British pound is connected precisely with the optimism of the markets about the trade agreement with the European Union, thanks to which it was possible to avoid a serious contraction of the British economy. The pound exchange rate has the greatest impact on inflation. The Bank of England is also questioning the accuracy of the latest data on wages and unemployment. The rhetoric of the report turned out to be very pessimistic, however, the pound had already plowed down a decent distance when this report was released.
No macroeconomic reports scheduled for Thursday in the UK, so traders can pay attention to reports from overseas. And there will be something to pay attention to. GDP report, durable goods orders, unemployment claims data. Although the GDP report may be the only one that is interesting. And traders might ignore it.
We have two trading ideas for February 25:
1) Bulls continue to hold the initiative in their hands. The pair is now moving very illogically and ignores technical signals. However, in case of a clear price rebound from the Kijun-sen line (1.4078) or the lower line of the rising channel, you are advised to open long positions with targets at the resistance levels of 1.4162 and 1.4240. Take Profit in this case can be up to 125 points.
2) Sellers continue to rest and watch the bulls. The last drop in quotes may be a simple correction, since the price remained both inside the rising channel and above the Kijun-sen line. So new short positions are not recommended at this time. You can consider short positions and aim for the lower line of the rising channel when the price is below the critical line (1.4078). Take Profit in this case can be up to 55 points. When overcoming the channel, you should sell the pair while aiming for levels of 1.3980 and 1.3951.
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.
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