GBP/USD 1H
The GBP/USD pair was trading rather chaotic on Tuesday. Yesterday, we marked the 1.3903 level as a support level, from which a rebound can be made. However, in practice, the bears managed to overcome this level at the European trading session, but unfortunately their strength dried up. We recommended selling the pair if this level is overcome, however, after forming a signal, the pair was able to go down by only about 20 points. After that, the pound/dollar pair turned to the upside and began a new round of upward movement, which continues at this time. We did not recommend buying the pair on the rebound from the 1.3903 level, therefore, its reverse overcoming should not have resulted in opening long positions. In general, one might say that the bears keep the initiative in their hands. Recall that the pound has been rising for a very long time, and during these five months (this is only the very last round of the upward trend), there was practically no serious correction. Therefore, the downward movement is still more preferable. A rebound from one of the two most important lines of the Ichimoku indicator - Kijun-sen or Senkou Span B - can provoke a new round of downward movement. Therefore, we recommend that you be especially careful around these lines.
GBP/USD 15M
The lower linear regression channel is turning to the upside on the 15-minute timeframe, which signals a possible reversal of the trend in the short term. However, as can be clearly seen in the chart above, buyers have two serious obstacles, which they need to overcome in order for the upward movement to continue.
No reports have been released in the UK to date. America also had a completely empty news calendar. So nothing influenced the pair's movement during the day. We now continue to draw your attention to two factors. The first is a strong increase in the money supply in the United States, which can cause a regular drop in the dollar throughout 2021. The second is the need for a stronger downward correction, both against a 5-month upward trend and against a 12-month one.
The UK Services PMI for February is due on Wednesday. At the end of January, this indicator rose to 49.7 points, which is only slightly below the level of 50.0, below which the negative trend in the industry remains. Thus, if this indicator rises above the level of 50, this may support buyers of the pound, and the pair will more easily overcome the Kijun-sen and Senkou Span B lines. Also, the ISM PMI will be published in the afternoon, which can also affect the dollar and all the pairs in which it is present. However, we are only talking about a strong decline in this indicator, in this case the pound/dollar pair may continue to grow. If the value of the ISM index is higher than the forecast or approximately the same, then traders may not particularly react to it. The ADP report is unlikely to be considered by the markets.
We have two trading ideas for March 3:
1) Bulls have released the initiative, but the bears have not yet managed to take the pair too far from the 2.5-year highs. Thus, the upward movement can resume at any time, despite the exit of quotes from the channel. We believe that it will be possible to buy the pair again if the price settles above the Senkou Span B line (1.4007) or the Kijun-sen line (1.4016) while aiming for the 1.4080 level. Take Profit in this case can be up to 50 points.
2) Tuesday was very difficult for the sellers and they let go of the initiative within the day. So now they need to rebound off the Senkou Span B or Kijun-sen lines, or get the pair to settle below them after they have previously gone up. In this case, you are advised to sell the pair while aiming for the 1.3903 level. Take Profit in this case can be up to 80 points.
Forecast and trading signals for EUR/USD
COT report
The GBP/USD pair rose by 150 points during the last reporting week (February 16-22). The last two Commitment of Traders (COT) reports have clearly signaled an increase in bullish sentiment among the "non-commercial" group of traders. Therefore, in general, the mood of the major players and what was happening in the market for the pair had coincided. Non-commercial traders opened a meager number of new contracts during the last reporting week. Only 1,000 Buy-contracts (longs) and 1,200 Sell-contracts (short). Thus, the net position for this group of traders has not changed, as well as the total number of open contracts. Consequently, there shouldn't have been any major changes in the market. Nevertheless, the pound continued to sharply rise, so we return to the hypothesis that the demand for the pound remains relatively high, but the high supply of the US dollar plays a big role in strengthening the pound, which is depreciating as a result. The COT reports do not take into account supply and demand for the dollar, therefore, if they significantly change in volumes, then this or that currency may move without correlating with COT reports for it. We see approximately the same picture for the pound. The first indicator does not show an unambiguous bullish sentiment all the time that is shown in the chart. The green and red lines constantly intersect and change the direction of movement, which indicates the lack of a clear strategy among professional traders. But the pound continued to steadily grow all this time.
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.