5M chart of GBP/USD
On Thursday, GBP/USD traded very quietly and volatility was low. Yesterday, the Bank of England announced the results of its meeting, raising its key rate for the eleventh straight time. However, at the same time, this was a slowdown in the pace of growth, and the pound had been growing for a few weeks till that day, so it was hard to count on further growth. However, it seems that quotes did not plummet as well (which would be logical). I feel like the market just simply ignored the BoE meeting. Considering the latest inflation report and the BoE's decision, I believe that the pound is already too high. Inflation in the UK has started to accelerate again, and the central bank has reduced the pace of tightening, showing that it can no longer raise rates quickly and aggressively. I believe this is a dovish signal to the market.
There were several trading signals on Thursday, but in the chart above, you can clearly see that the pair was in a flat position between 1.2269 and 1.2342 all day. The first sell signal was formed at the beginning of the European session, but the pair returned to the formation point before it reached the target. Therefore, a Stop Loss on breakeven. However, we failed to open a new short position since the price did not surpass 1.2342. A rebound from 1.2269 followed, but in this case, the pair failed to reach the target level as well. But in the evening, traders could manually close the deal, getting a couple of tens of points of profit.
COT report:
For the British pound, the COT reports are still coming out very late, with the CFTC continuing to catch up on the chart. The last report available is for March 7. According to that report, the non-commercial group opened 7,500 long positions and 1,200 short ones. Thus, the net position of non-commercial traders increased by 6,300 and continues to grow. The net position indicator has been steadily growing over the past months but the mood of major traders still remains bearish. Although the pound sterling is growing against the dollar (in the medium term), it is very difficult to answer the question why it is doing this from a fundamental point of view. It is quite possible that the pound sterling may slump in the near future. Formally, it has already begun its downward movement but so far it looks more like a flat. Notably, both major pairs are moving similarly at the moment. However, the net position for the euro is positive and even implies the imminent completion of the upward momentum, whereas for the pound it is negative. But at the same time, the pound has already grown by 2100 points, which is a lot, and without a strong bearish correction the continuation of the growth will be absolutely illogical. The non-commercial group opened a total of 66,000 shorts and 46,000 longs. We remain skeptical about the long-term growth in the British currency and expect it to fall deeper.
1H chart of GBP/USD
On the one-hour chart, GBP/USD continues to trade higher, supported by the trend line. However, it continues to move within the horizontal channel on the 24-hour chart, which, I should remind you, is 600 pips wide. Therefore, the pound has the potential to rise, but only technically. From a fundamental perspective, I have been expecting the pound to fall for a long time, but at the moment, there is a trend line, which supports the growth. Therefore, until the pair settles below the trend line, the uptrend could persist. On March 24, it is recommended to trade at the key level of 1.1927, 1.1965, 1.2143, 1.2185, 1.2269, 1.2342, 1.2429-1.2458, 1.2589. The Senkou Span B (1.2041) and Kijun Sen (1.2254) lines can also generate signals. Rebounds and breakouts from these lines can also serve as trading signals. It is better to set the Stop Loss at breakeven as soon as the price moves by 20 pips in the right direction. The lines of the Ichimoku indicator can change their position throughout the day which is worth keeping in mind when looking for trading signals. On Friday, we will only receive secondary reports - PMIs. The US will also release its Durable Goods orders report, but I don't think traders will react to it. Fed representative James Bullard's speech is important, but Bullard himself is not a voting member of the Fed this year.
Indicators on charts:
Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals.
Kijun-sen and Senkou Span B are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines.
Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals.
Yellow lines are trend lines, trend channels, and any other technical patterns.
Indicator 1 on the COT chart is the size of the net position of each trader category.
Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.
