GBP/USD 1H
The GBP/USD pair continues to move extremely cheerfully and illogically. The quotes of the pair finally, using the seventh attempt, overcame the 1.3745 level and continued to move up. After breaking this level, the bulls were able to push the pair by another 50 points. Thus, our assumption that we should not expect strong growth in case the price surpassed the 1.3745 level came true. It was the same with the 1.3700 level: five or six attempts, followed by an increase of 50 points and three weeks of soaking around 1.3745. Now the price has come close to the resistance level of 1.3804. The bulls still found the strength to raise the pair even more, but how much can the pound be pushed with the current problems in the British economy? Market participants cannot forever ignore the foundation from the UK! But for now, they are brushing it off, which means that the upward trend is preserved, and it is preferable to trade bullish. Yesterday we recommended trading bullish if the price breaks the 1.3745 level. This signal was generated, and the price eventually rose to the 1.3804 level. So, traders could get about 45-50 points of profit on this signal. You were advised to sell the pair in case the price rebounds from the 1.3745 level, which did not happen.
GBP/USD 15M
Both linear regression channels are directed to the upside on the 15-minute timeframe, which eloquently describes the short-term trend - "upward". If there is a clear rebound or "false breakout" from the 1.3804 level, it may lead to a very likely downward movement of at least 50-100 points.
COT report
The GBP/USD pair fell by 20 points during the last reporting week (January 26-February 1). Despite the fact that price changes were nearly non-existent in recent weeks, the uptrend continues to persist and is clearly visible. The pound continues to rise despite the fact that the latest reports do not unambiguously indicate a growth in interest for the British currency among professional traders. A paradoxical situation that is difficult to explain. The latest Commitment of Traders (COT) report revealed that the non-commercial group of traders opened 5,500 buy contracts (longs) and almost 5,500 sell contracts (shorts) during the reporting week. Thus, the net position for this group of traders has not changed, and the sentiment of the major players has not changed. Basically, this conclusion coincides with the scale of price changes over the reporting week. As for long-term prospects, there is still no clear and logical conclusion. The total number of open buy contracts for professional traders is still higher than that of the sell, but the advantage is not too large (55,000 versus 44,000). The indicators, which are designed to visualize changes in the mood of large traders, continue to show the absence of a "single party line". The mood of non-commercial traders is constantly changing, as indicated by the green line of the first indicator. The mood of commercial traders is also constantly changing, which is signaled by the red line of the first indicator. And in technical terms, it seems like the pound will collapse by 500 points tomorrow, but the fundamental background contradicts this hypothesis. An extremely confusing situation.
No major event or report scheduled for Tuesday in the UK. However, as we can see, this did not stop traders from buying the pound. We believe that the main reason for the highest long-term demand for the pound (or rather weak demand for the dollar) lies in two global fundamental factors, which we have already written about in our fundamental reviews. There can be no other reasons for strengthening the pound.
In addition to Bank of England Governor Andrew Bailey's speech on Wednesday, the US will publish a fairly important macroeconomic report on inflation for January. The CPI is expected to rise by 1.5% on an annualized basis. Core inflation may, on the contrary, fall to 1.5% in annual terms. In any case, the changes will be insignificant, and hence the reaction of the markets as well. If the actual values are very different from the forecasts, then one can expect a tangible reaction of traders, depending on the nature of the report.
We have two trading ideas for February 10:
1) The price overcame the 1.3745 level, so the upward movement resumed. Therefore, you are advised to trade bullish today when the price has finally surpassed the 1.3804 level with the first target at the resistance level of 1.3876. Take Profit in this case will be up to 70 points. It is also recommended to open long positions when the price rebounds from the levels of 1.3745 and 1.3700 while aiming for the 1.3804 level.
2) Sellers were unable to overcome the 1.3606-1.3626 area, so the pair's downward movement was temporarily canceled. Since the trend is now clear and it is upward, trading bearish would not be the best thing to do. However, the persistent swing mode may well lead to a downward movement of 100 points. Therefore, in the event of a precise and clear rebound from the 1.3804 level, we recommend selling the pound in small lots with targets at 1.3745 and 1.3700. Take Profit in this case will be up to 100 points.
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.
