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Analysis of GBP/USD 5M.
The GBP/USD currency pair also tried to adjust on Monday but eventually collapsed even more. The fall began immediately at the opening of trading on Monday night. There were strong downward movements and strong upward pullbacks. No important macroeconomic events were planned on Monday in either the UK or the US. Nevertheless, as we can see, now traders do not need them to actively trade the pair. All pairs. The military conflict in Ukraine continues, although in recent days, admittedly, they have started shooting much less. However, this does not mean that tomorrow Kyiv and Moscow will sign a truce and that will be the end of it. The positions of the parties to the conflict differ radically from each other.
There were three trading signals during the past day. And, at least, the first two leave much to be desired. At first, the pair gained a foothold below the 1.3170-1.3185 area, which should have been used to open short positions. The price managed to go down about 20 points, which was barely enough to set the Stop Loss to zero, according to which the deal eventually closed. Then a buy signal was formed when the price was fixed above the level of 1.3185. This time, traders were also frankly lucky, as the price went up 21 points, which again allowed them to set a Stop Loss at breakeven, at which the transaction closed. The third sell signal should have already been ignored since twice traders exited Stop Loss trades. However, it was the third signal that turned out to be profitable. As a result, traders did not receive a loss on Monday, but they also failed to close in profit.
COT Report:
The latest COT report on the British pound showed an increase in bullish sentiment among professional traders. And a week earlier - the strengthening of the "bearish" mood. In general, the mood of the major players changes too often, which is seen by the two indicators in the illustration above. At the moment, the net position of the "Non-commercial" group is near zero, which means a "neutral" mood. The same conclusion is confirmed by the absolute data on the number of open contracts. There are 51 thousand of them for purchase now, and 50 thousand for sale. That is almost complete equality. Moreover, since July last year, professional traders have not been able to decide where to trade the British pound. Only in December, there was a serious strengthening of the "bearish" mood, which led to a significant drop in the UK currency. The rest of the time, the players cannot decide in the medium term what to do with the pound. Therefore, the absence of a strong fall in the British pound partly corresponds to the COT reports. However, we still believe that COT reports are not the best tool for forecasting right now. At a time when the whole world is increasing demand for the dollar as a reserve currency, we can expect growth of this particular currency, despite any data from COT reports. This is exactly the picture we are seeing now in the euro currency, where purchases are growing, and the currency itself is falling at the same time. Thus, geopolitics remains in the first place in terms of importance.
Analysis of GBP/USD 1H.
A downward trend is also visible to the naked eye on the hourly timeframe, but now there is also a downward trend line that visualizes the trend well. The price overcame the levels of 1.3170 and 1.3185 and these were the last actual levels. There are simply no lower levels since the price has not been so low for a very long time. Therefore, all transactions below this area will have to be closed only manually. On March 8, we highlighted the following important levels: 1.3170-1.3185, 1.3273, 1.3367. The Senkou Span B (1.3457) and Kijun-sen (1.3267) lines can also be signal sources. Signals can be "bounces" and "surmounts" of these levels and lines. It is recommended to set the Stop Loss level to breakeven when the price passes in the right direction by 20 points. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. Also in the illustration, there are support and resistance levels that can be used to fix profits on transactions. There are no major events or publications scheduled for Tuesday in the UK and the US. Thus, during the day, traders will be able to pay attention again only to geopolitical news. We believe that the probability of a stronger correction is high, especially for the pound, but Monday showed that traders are ready to sell the pair further, regardless of the need to adjust.
Explanations to the illustrations:
Price levels of support and resistance (resistance /support) - thick red lines, near which the movement may end. They are not sources of trading signals.
Kijun-sen and Senkou Span B lines - the lines of the Ichimoku indicator, transferred to the hourly timeframe from the 4-hour one. Are strong lines.
Extreme levels - thin red lines from which the price bounced earlier. They are sources of trading signals.
Yellow lines - trend lines, trend channels, and any other technical patterns.
Indicator 1 on the COT charts - the net position size of each category of traders.
Indicator 2 on the COT charts - the net position size for the "Non-commercial" group.
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