GBP/USD - 1H
On the hourly chart, the GBP/USD pair has made a reversal and resumed the downward movement, closing below the second ascending trendline. Thus, traders' sentiment has changed to bearish. If so, the price will continue to decline to the retracement level of 100.0% - 1.3625. Besides, a descending channel has been formed, which paves the way for further growth of the US currency. Meanwhile, Prime Minister Boris Johnson said the UK strain of the coronavirus could be more deadly than other COVID-19 strains. A new type of the virus, found in the southeast of the UK and London, is not only spreading faster, but also poses a higher health risk, according to the UK health care system. The comparison of death rates from coronavirus and its new strain supported this assumption. However, scientists warn that these numbers may be inaccurate, since it is impossible to track all cases of the new coronavirus strain. Boris Johnson also said that the lockdown may be eased, and the decision will be made by mid-February. According to Johnson, the UK has made great progress in containing COVID-19 spread, and UK citizens do not want to see another wave of infection. The number of new cases has indeed declined in the UK in recent weeks. However, the overall death rate remains the highest in Europe.
GBP/USD - 4H
On the 4-hour chart, the GBP/USD pair closed below the 127.2% - 1.3701 retracement level, which limits its uptrend. At the same time, a new ascending trendline has been formed, so the sterling still has a good chance of growing further. Closing below the trendline will favor the US dollar and will prompt the beginning of a long fall to the 100.0% - 1.3481 Fibonacci level.
GBP/USD - Daily
On the daily chart, the quotes consolidated above the retracement level of 100.0% - 1.3513 and then rebounded from it. Thus, the upward movement may continue towards Fibonacci level of 127.2% - 1.4084.
GBP/USD - Weekly
On the weekly chart, the pound/dollar pair closed above the second descending trendline. Thus, the chances of a long-term rise in the pound sterling become significantly higher.
News overview
On Monday, Governor of the Bank of England Andrew Bailey spoke at the World Economic Forum in Davos. However, there was nothing important for the British pound traders.
UK Economic calendar
UK - Change in the number of claims for unemployment benefits (07-00 GMT).
UK - Unemployment rate (07-00 GMT).
UK - Change in average earnings (07-00 GMT).
On January 26, the UK will release the reports on unemployment, wages and claims for unemployment benefits. Weak data could trigger another fall in the British currency.
COT (Commitments of traders) report
The latest COT report from January 19 showed little change in the sentiment of major traders. The non-commercial category of traders, which is of most interest to us, reduced 2,020 long contracts and 3,105 short contracts for the reporting period. So, we can say that the market sentiment has become more bullish. However, traders are reducing the number of contracts rather than changing their capacity. The trajectory of the British pound is still unclear for big players as they do not know what to expect from it in the coming year. Now the pound is growing. It has been rising for a long time, and this is even more alarming, given the problems of the UK economy. Yet, the COT report confirms that the pound sterling is likely to continue its uptrend.
GBP/USD forecast and trading tips
I would recommend opening new long positions on the pound after the price has bounced off the trendline on H4 with the targets at 1.3698 and 1.3744. It is better to open short positions on GBP when it closes below the trendline on the hourly chart. Now we need to maintain these positions at the levels of 1.3625 and 1.3600. New sell positions should be opened when the price closes below the trendline on the 4-hour chart.
Terms
Non-commercial traders include major market players such as banks, hedge funds, investment funds, private, large investors.
Commercial traders are commercial enterprises, firms, banks, corporations, and companies that buy currency not for speculative profit, but for ensuring current activities or export-import operations.
Non-reportable positions are small traders who do not have a significant impact on the price.
