GBP/USD 1H
The pound/dollar pair slightly retreated from local and 2.5-year highs on Tuesday. By about 80 points, which is nothing for this pair - a common, banal pullback. Thus, yesterday's movement cannot even be called a correction. The upward trend line remains in effect, so long positions will still be relevant. A seemingly perceptible downward movement began in the second half of Tuesday, but it ended very quickly, and the price returned almost to where it had started its downward movement. Thus, the bears failed to seize the initiative in the market. Consequently, in the coming days, traders have the right to expect the next renewal of the maximum value of the British pound, which still has very little reason for growth. However, the markets continue to ditch the dollar to buy the pound. In our last review, we recommended buying the pair while aiming for 1.3984 if the pair settled above the 1.3917 level. However, the quotes did not reach the target level, therefore, this deal was closed in the place where the price dropped back below the 1.3917 level, thus bringing about 10 points of loss to traders. You are advised to open short positions only if the price surpasses the trend line, which did not happen yesterday. So short positions were out of date yesterday. Actually, take note that the upward reversal occurred very close to the Kijun-sen line and the trend line. Almost a rebound.
GBP/USD 15M
Both linear regression channels remain upward on the 15-minute timeframe, clearly signaling an upward trend in the short term. Hopes and plans for a correction have not come true once again, and the dollar remains in a very difficult position. Now the outlook for bears is below the Kijun-sen line and the trend line. There is no need to think about a succeeding decline until they manage to overcome these obstacles, even a correctional one.
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.
No macroeconomic events were scheduled for the UK and the US on Tuesday. Thus, the conclusions are the same as for the euro/dollar pair: today's rather active and sharp movements of the pair are associated with technical reasons. Or with reasons that are beyond the reach of most traders. Possibly any big deals among non-commercial traders.
The situation will finally get more interesting on Wednesday. The UK will publish a report on inflation for January, which may slightly decrease compared to December. Thus, if this forecast comes true, the British currency may again find itself under slight pressure. The report on retail sales in the US will be released after lunch, which may also have an indirect impact on the pair's movement. We believe that there will be little or no reaction from traders in any case.
We have two trading ideas for February 17:
1) The price quickly completed another microscopic round of correction. You are advised to open new long positions when the price bounces off the trend line or the Kijun-sen line (1.3865) with targets at 1.3917 and 1.3951. Take Profit in this case will be up to 75 points. Any other signals, from our point of view, may be false, and the pair itself will try to enter a new round of correction today.
2) Sellers tried to gain a foothold below the trend line on Tuesday, but they failed again. Thus, you are advised to sell the pound/dollar pair if the price settles below the trend line while aiming for 1.3776. Take Profit in this case will be up to 70 points. You should be careful with forming such a signal. If the overcoming of the trend line is sharp, and the candlestick is strong, then the succeeding downward movement may be weak. Ideally, if the price gains a foothold 10-15 points below the trend line.
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.
