GBP/USD - 1H
Good afternoon, dear traders! Yesterday, the GBP/USD pair pulled back from the retracement level of 127.2% - 1.3744 on the H1 chart and started a decline towards the retracement level of 100.0% - 1.3625. This is the second rebound from the 127.2% level. A pullback from the retracement level of 100.0% will stop the pound from further decline. In this case, a reversal will favor the pound, and it will resume the rise towards the 1.3744 level. Closing below 1.3625 will increase the likelihood of a further decline towards 76.4% - 1.3522. UK Prime Minister Boris Johnson is going to visit Scotland, although Scotland's First Minister Nicola Sturgeon questioned the appropriateness of this travel. However, the media reports that Johnson is seriously concerned about the future integrity of the United Kingdom. The recent polls showed that the majority of Scots support the idea of independence from the UK. Nicola Sturgeon has repeatedly called on London with a request to hold a new referendum on independence, but each time she got a refusal. The last referendum was held in 2014 when the majority of Scots voted to remain with the UK. Since then, however, the UK has left the EU. It has become clear now that Scotland wanted to be part of the UK within the EU, rather than just be a part of Britain. Therefore, Johnson will try to build a dialogue and discuss this vital issue with Nicola Sturgeon. The next Scottish Parliament election is scheduled to be held in spring. Sturgeon's party is likely to win a crushing victory.
GBP/USD - 4H
On the 4-hour chart, the GBP/USD pair has dropped to the ascending trendline. A new rebound will be good for the sterling as it will resume growth to the 161.8% - 1.3977 Fibo level. Closing below the trendline will allow traders to count on a reversal in favor of the US dollar and a slight drop towards the retracement level of 100.0% - 1.3481.
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 pair may continue to rise in the direction of the 127.2% - 1.4084 Fibo level.
GBP/USD - Weekly
On the weekly chart, the pound/dollar pair settled above the second descending trendline. Thus, the chances of a long-term rise in the pound sterling have become significantly higher.
Fundamentals overview:
On Wednesday, no important economic reports were released in the UK. So, traders were mostly focused on the news from the US and the decision made by the Fed.
US and UK Economic calendar:
US – GDP Quarterly (Q4) (13-30 GMT).
US – Number of initial and repeated jobless claims (13-30 GMT).
On January 28, the economic calendar is almost empty in the UK. So, all attention will be on the Q4 GDP data from the US.
COT report (Commitments of traders):
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.
Forecast for GBP/USD and trading tips:
We would recommend opening new long positions on the pound after the price has pulled back from the 100.0% - 1.3625 level on H1 with the targets at 1.3698 and 1.3744. It is recommended to sell the pound sterling when the price closes below the trendline on H4 chart with the targets at 1.3522 and 1.3481.
Terms:
Non-commercial traders include major market players such as banks, hedge funds, investment funds, private, and 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.
