GBP/USD - 24H.
The GBP/USD currency pair fell by 90 points during the first trading week of this year. That is, a downward correction has begun, which looks like a correction. More like a rollback. Such pullbacks in the pound sterling occur regularly, each time in recent months after they resumed the upward trend. The upward trend continues at this time, even though there are a lot of unresolved problems in the UK. A trade agreement with the European Union has been agreed upon, so the economic losses of the bloc and the Kingdom will be less than they could have been. But they will still be there. In particular, this applies to the UK's services sector and its financial sector, which accounts for a large part of GDP. But traders continue to stubbornly ignore all these factors. Moreover, all macroeconomic statistics continue to be ignored. Thus, it is still extremely difficult to understand why the British pound as a whole continues to rise in price against the dollar. The most interesting thing is that nothing disastrous and disappointing is happening now in the States. Thus, it cannot be concluded that the problem is in the fundamental background of America.
The COT report.
During the last reporting week (December 29-January 4), the GBP/USD pair increased by 120 points. The pound continues to maintain a steady upward trend. And the latest COT report, which was released this Friday, again showed minimal changes. Professional traders opened about 1 thousand contracts for buying and 1 thousand contracts for selling during the New Year's week. Thus, the net position for the "Non-commercial" group of traders has not changed at all. There is no point in considering changes for other groups of traders, as they are also insignificant. Thus, for several weeks in a row, non-profit traders are extremely cautious about the pound, trying to trade it at a minimum. This is also supported by the fact that the total number of contracts for the pound in the "Non-commercial" group is only 85 thousand (for comparison with the euro 340 thousand). The first indicator shows that the mood of major traders has not changed much in recent weeks. If earlier the green and red lines regularly changed the direction of movement, crossed, moved away, or converged, now they are directed sideways. But even this factor does not prevent the British pound from continuing to rise in price. We conclude that everything now depends on the demand for the US dollar. As for the conclusions on the COT report itself, there are none.
The entire fundamental background for the GBP/USD pair this week was reduced to the fact that the third "lockdown" began in the UK due to an excessively strong increase in cases of "coronavirus" and, in particular, a new strain of "coronavirus", which is 50-70% more contagious than usual. Thus, the country is closed for the third time for total quarantine. However, for market participants, this news meant little. The pound did not fall down but slightly corrected. There was simply no other important news for the British currency. We continue to draw traders' attention to the fact that the fundamental background and macroeconomic statistics continue to be ignored. On Friday, the failed report on nonfarm Payrolls was supposed to create serious pressure on the US dollar. But there was no such thing. As we have already discussed above, there is also no pressure on the pound due to the growing number of new cases of COVID-2019 every day (68,000 Britons fell ill on January 8). Thus, it is still possible to pay attention only to technical factors. In recent weeks, both the euro and the pound have often formed false signals. However, there is nothing to do. Either trade on the "technique" or do not trade at all. There is little hope that something will change in the near future, and the markets will once again take into account the fundamental background and "macroeconomics". However, we remind you that you need to trade strictly according to the trend, although the factors for strengthening the pound sterling still need to be sought out.
Trading plan for the week of December 11-15:
1) The price retains the upward trend without any problems and barely began to adjust. Thus, in the 24-hour timeframe, the target for an upward movement remains at the level of 1.3851. We recommend that you continue to consider options for opening long positions on the higher timeframe as long as the price is above the critical line, and do not try to guess the end of the upward trend.
2) Sellers are still quite weak. This week, the bears tried to seize the initiative, but it ended with only a minimal pullback. Thus, for the possibility of opening short positions, it is now recommended to wait again, at least, for the price to consolidate below the critical line. If this condition is met, a downward trend may form in the 4-hour timeframe.
Explanation of the illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.