GBP/USD 1H
Yesterday, the pound/dollar pair also continued the downward movement that had begun the day before, but the upward trend line was surpassed much later than the euro. Thus, a new downward trend was formed for the pound/dollar pair. The pair also crossed the Kijun-sen line, which increased the likelihood of moving further down. However, we immediately draw attention to the fact that the pound/dollar pair moved down much weaker than the euro/dollar pair. Although, in theory, everything should have been the other way around. And this moment is alarming. It seems that the pound is moving down reluctantly and may resume a long-term upward trend at any time. Take note that traders ignored the British reports today. But from a technical point of view, we have a new trend and it should be downward. Yesterday we recommended trading bullish if the pair rebounds off the trend line or the Kijun-sen line. There was no rebound from either the first or the second. But the trend line breaking, which we recommended to consider as a sell signal, happened. Therefore, traders had the opportunity to open short positions while aiming for 1.3776. Unfortunately, unlike the euro, the downward movement turned out to be very weak and the bears did not reach the target level. Therefore, traders could earn only a few tens of points on this deal.
GBP/USD 15M
Both linear regression channels turned to the downside on the 15-minute timeframe, so the short-term trend is down. The movement is weak, but there are no signs of it ending at this time. The US dollar is very reluctant to rise in price, so you need to be ready for an upward reversal.
COT report
The GBP/USD pair rose by 80 points during the last reporting week (February 2-8). Yes, the pound is not in a rush to rise. The price increases are very moderate - 50-80 points per week, but they have been stable over the past five months. The latest Commitment of Traders (COT) report showed a major shift in the mood of the big players. A group of non-commercial traders opened new 6,500 thousand buy contracts (longs) and closed 4,600 thousand sell contracts (shorts) during the reporting week. Thus, the net position of professional traders has increased by 11,000 contracts. Considering the fact that the total number of contracts for the "non-commercial" group before the current changes was about 100,000, then 11,000 contracts for changing the net position is a lot. Most importantly, non-commercial traders have become more bullish. Consequently, the pound can continue to rise in the long term. The indicators also show a very high probability of succeeding growth. The green and red lines, which represent the net positions of the non-commercial and commercial groups, continue to move away from each other, which indicates a strengthening trend. Professional traders believe in the pound despite the fact that no growth factors for this currency come from the UK.
The UK published its inflation report for January. Despite the fact that it turned out to be better than forecasts (0.7% y/y versus 0.6% y/y), this did not play any role for the British pound. Market participants did not pay attention to a very interesting and important report. Well, it's not the first time. But at this time we have a more or less clear and understandable technical picture and the absence of a "swing", which facilitates the process of trading the pair.
No important reports and events from the US and the UK on Thursday. Thus, traders can focus on technical analysis and look for technical signals to trade the pound/dollar pair. The pound can fall by another hundred points. Nevertheless, this was preceded by a rather strong downward movement and a correction of 100 points is clearly insufficient.
We have two trading ideas for February 18:
1) Bulls still let go of the initiative. Thus, a new downward movement has just begun, so long positions are not relevant. We recommend waiting a day or two in order to understand whether the downward movement will continue or the upward trend will resume very quickly.
2) Sellers tried to settle below the trend line on Wednesday. Thus, traders could sell the pair on this signal while aiming for the 1.3776 level. Take Profit in this case will be up to 90 points. The signal has not yet been canceled at the moment, so it can be maintained. The Stop Loss level can be transferred to breakeven just in case.
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.
