GBP/USD 15M
Both linear regression channels are directed to the upside on the 15-minute timeframe. Therefore, the upward trend continues in the short term. The 1.3702 key level has held out and it is possible that the pair might fall. At least until the quote surpasses this level, it is too early to talk about a significant growth from the pound.
GBP/USD 1H
The GBP/USD pair continued to move up on Wednesday, which began on Tuesday after rebounding from the lower line of the descending channel. As a result, the pound/dollar pair was just a point short from reaching the previous local high of 1.3702 and started a new round of downward movement, which coincided with the release of the US inflation report. Take note that it so often happens that reaching the high also results in the pair's pullback. Thus, the inflation report really could hardly have stopped traders from rising further. Most likely, buyers simply gave up before the 1.3702 level, as they realized that doing the same thing for three days from just one factor like Andrew Bailey's speech was too much, which, by the way, cannot even be called completely hawkish and optimistic. In general, so far the pair has retreated. Let's see if it will stop falling around the 1.3606-1.3626 area or by the Kijun-sen and Senkou Span B lines. According to our assumption about the high volatility swing mode on the 4-hour timeframe, the pair should now fall by 200-250 points.
COT report
The GBP/USD pair increased by 120 points during the last reporting week (December 29-January 4). The pound continues to maintain a steady upward trend. And the latest Commitment of Traders (COT) report, which came out last Friday, showed minimal changes again. During the New Year's week, professional traders opened about 1,000 Buy-contracts (longs) and 1,000 Sell-contracts (shorts). Thus, the net position for the "non-commercial" group of traders has not changed at all. It makes no sense to also consider changes in other groups of traders, as they are also insignificant. Non-commercial traders have been extremely cautious about the pound for several weeks now, trying to trade it at a minimum. This is also supported by the fact that the total number of contracts for the "non-commercial" group is only 85,000 (for comparison, 340,000 for euros). The first indicator shows that the mood of large traders has remained practically unchanged in recent weeks. If earlier the green and red lines regularly changed the direction of movement, crossed, removed or approached, now they are directed to the side. But even this factor does not prevent the pound from growing in price. We conclude that now everything depends on the demand for the US dollar. As for the conclusions of the COT report itself, there are none.
The only macroeconomic report on Wednesday that worried the pound/dollar pair was the US inflation report. It turned out to be higher than analysts' forecasts. The main indicator of inflation was 1.4% y/y, and accelerated to 0.4% on a monthly basis. The core consumer price index was 1.6% y/y, unchanged from the previous month. Thus, this report could and probably did provide some restrained support for the US dollar. However, acceleration of inflation through the fall of the national currency is not exactly what the Federal Reserve would like to see. In fact, the whole point of target inflation is lost. The Fed wants to achieve a stable 2% y.y on the basis of economic growth, not on the basis of a falling dollar. So, in fact, the report is cautiously optimistic.
No macroeconomic reports in the UK on Thursday, but the US is set to publish a report on applications for unemployment benefits, as well as a speech by Fed Chairman Jerome Powell. Recall that a day earlier, European Central Bank President Christine Lagarde made some interesting statements, so market participants expect a lot from Powell's first speech in 2021. He will talk about the US economy and monetary policy.
We have two trading ideas for January 14:
1) Buyers for the pound/dollar pair quickly returned the initiative to their own hands. So now we can consider trading bullish while aiming for 1.3667, 1.3702 and 1.3771. At the same time, you should open new buy orders when the price rebounds from the 1.3606-1.3626 area or the Kijun-sen (1.3575) and Senkou Span B (1.3565) lines. Take Profit in this case will be up to 100 points. If there are no such rebounds, then you shouldn't open longs.
2) Sellers have not managed to build on their success, but at the same time they have excellent chances to work out a new decline by 200 points, according to the "high volatility swing" mode. Selling is not relevant at the moment, but if the price settles below the Senkou Span B line (1.3565), then you can open short positions while aiming for support levels of 1.3496 and 1.3429. Take Profit in this case will be from 50 to 110 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.
