GBP/USD 15M
Both linear regression channels turned to the upside again on the 15-minute timeframe. Thus, the upward trend has also resumed in the short term. Another downward reversal may occur near the key level of 1.3702, and overcoming it will result in a succeeding upward movement. There is a 90% probability of this actually happening.
GBP/USD 1H
The GBP/USD pair corrected to the support area of 1.3606-1.3626, after a strong upward breakthrough, which led to a reversal of the upward trend. This area was reached three times, and a rebound was also made three times. Thus, the upward movement resumes while the target is 1.3771. Despite the fact that we continue to receive extremely negative news from Great Britain, the pound did not go far from the 2.5-year highs, and also renewed them with enviable regularity. Thus, after a correction to the downside by 250 points, which was observed in the first days of the new year, the upward trend has now resumed. In general, it is still impossible to tie the fundamental background to what is happening in the foreign exchange market. If the euro/dollar pair is trying to trade at least more or less logically and reasonably, then the pound ignores all the rules, news and reports. Thus, we continue to recommend trading this pair solely based on technical analysis and technical signals.
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.
There is a fundamental calm in the UK at this time. There is practically no news, except for epidemiological ones. As soon as the Brexit Saga ended and trade negotiations, topics for discussion, and pressing news lessened. However, as we can see, the pound continues to firmly strengthen in the long term. No matter what. There was no big news in Britain on Thursday, and the US released a report on jobless claims. It turned out that the number of initial applications for the following week reached 965,000, which is significantly higher than forecasts. The number of secondary applications, which many consider to be an indicator of real unemployment, also sharply grew, from 5.1 million to 5.3 million. Thus, formally, if we assume that this is not the most significant report that was worked out by traders, then the movement in the afternoon was even logical. Three bounces from the 1.3606-1.3626 area plus a weak US report. I would like to believe that everything was so.
The UK will publish its November GDP report on Friday. According to analysts' forecasts, the indicator will decrease by 4.6% in monthly terms. This is exactly what we talked about and what we were waiting for. We've been warning for months that the UK economy is likely to contract in the fourth quarter of 2020 and the first in 2021. It will decline when the US continues to recover and grow. Isn't this one of the most important factors when comparing two currencies and two economies? In addition, reports on industrial production in Britain and a number of minor publications are due today.
We have two trading ideas for January 15:
1) Buyers for the pound/dollar pair quickly returned the initiative and are dominating again. So now you are advised to stay with long positions while aiming for 1.3771. You can open new buy orders when the price rebounds from the 1.3606-1.3626 area or from the Kijun-sen line (1.3575). Take Profit in this case will be up to 100 points. If there are no such rebounds, then you shouldn't open new 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 like 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.
