GBP/USD 5M
The GBP/USD currency pair moved even better than the EUR/USD pair on Tuesday. Volatility was significantly higher and a trend movement was observed for most of the day. The lines of the Ichimoku indicator worked just fine in this case, but there are questions about the reasons for such a strong growth of the British currency. There is a hypothesis that this is a premature reaction to today's UK inflation report. This is just an assumption, but theoretically it is possible, since no important messages were received from Great Britain yesterday. Federal Reserve Chairman Jerome Powell's speech from a day earlier also could not provoke such a drop in the dollar, as it was completely hawkish. However, now there is no point in speculating why this happened. The fact is different – there was a strong trend movement all day.
There were few trading signals during the day, but they were almost all perfect. First, the pair bounced off the Kijun-sen line, forming a buy signal. It should have been worked out. It was possible to close the deal on the signal of a rebound from the extreme level of 1.3194. It turned out to be false, but the long position was closed in profit by 50 points. The short position opened on the rebound from the level of 1.3194, unfortunately, closed at a loss of about 35 points when the price overcame the Senkou Span B line, because the Senkou Span B line and the 1.3194 level should be considered as a resistance area. However, a new long position should also be opened at the signal of overcoming Senkou Span B, which made it possible to earn another 40 points. But that's not all. The rebound from the extreme level of 1.3273 could also be worked out by a short position. This transaction brought another 10 points of profit, and it should have been closed manually closer to the end of the working day. As a result, the day could be closed with a profit of 60-70 points.
COT report:
The latest Commitment of Traders (COT) report showed an increase in the bearish mood among commercial traders. However, in general, the mood of the major players has changed too often in recent months, which is clearly seen by the two indicators in the chart above: they are constantly changing the direction of their movement. At the moment, the number of open long positions is less than the number of short positions by almost 30,000. Although two weeks ago their number was almost the same. Earlier, we concluded that major players could not make a decision regarding the British pound, but we also drew attention to the fact that with the complication of the geopolitical situation, the demand for the US currency grew very much, which could "cross out" the data of COT reports. However, now the current picture of what is happening in the foreign exchange market is already beginning to correspond to the COT reports. Thus, the pound may now be at the beginning of a new round of decline. But, since in recent weeks it has only been falling, now another upward correction may follow, and then everything will depend on the geopolitical background. Like the mood of traders, the market situation can change rapidly. A month ago, few people believed that an armed conflict could break out in the center of Europe on a huge territory. Therefore, you need to be prepared for everything, and use COT reports only as an additional factor of assessment and forecasting.
We recommend to familiarize yourself with:
Overview of the EUR/USD pair. March 23. The gap between the ECB and the Fed is widening.
Overview of the GBP/USD pair. March 23. Joe Biden goes to Brussels to negotiate the rejection of Russian oil and gas.
Forecast and trading signals for EUR/USD on March 23. Detailed analysis of the movement of the pair and trading transactions.
GBP/USD 1H
The technical picture looks very strange on the hourly timeframe. First, the price overcame the lower boundary of the ascending channel, and then sharply resumed growth. As a result, the channel is no longer relevant at this time, and the upward trend has remained. And what caused such a strong growth of the British currency on Tuesday remains a mystery. On March 23, we highlight the following important levels: 1.3087, 1.3194, 1.3273, 1.3367. The Senkou Span B (1.3115) and Kijun-sen (1.3157) lines can also be signal sources. Signals can be "bounces" and "breakthroughs" of these levels and lines. It is recommended to set the Stop Loss level to breakeven when the price passes in the right direction by 20 points. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels on the chart that can be used to take profits on transactions. Bank of England Governor Andrew Bailey's speech and an inflation report are scheduled for Wednesday in the UK. Both of these events are extremely important. Bailey did not speak after the BoE meeting last week, so he can tell the market important information. And the inflation report itself is important. Powell will also give another speech today, which can also be very interesting and reflected on the chart of the pound/dollar currency pair.
Explanations for the chart:
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.
