GBP/USD – 1H.
Hi dear traders! On a 1-hour chart of GBP/USD, the price reversed in favor of the pound sterling yesterday, thus having climbed to 1.3988. I plotted a downward trend channel following the recent price action. A retracement off the upper border makes us predict some decline towards the lower border of 1.3840. At the same time, fixation of the price above the channel will benefit the sterling that will encourage a further growth towards a correctional level of 200.0% or 1.4063. In the recent days, both EUR/USD and GBP/USD have been moving in a similar manner. The US dollar asserted strength in both pairs. I expanded on the reasons behind USD strength in the article about EUR/USD. In fact, the same information background is true about GBP/USD.
Lately, the UK has released a small number of news. Today, investors will find out a report of major importance, an annual state budget for 2021. So, market participants will get to know basic expenditures and revenues. The UK Chancellor of the Exchequer announced on Tuesday that under pandemic conditions the employment support program would be extended until September. For your reference, the UK launched a government program under which all employees, who lost jobs due to layoffs amid the pandemic, are paid up to 80% per month of their salary at the last job.Besides, Rishi Sunak stated that another 600,000 people who did not receive any financial aid from the government would be paid since March. Traders will be keen to find out how the government will support businesses which have to survive the crisis. British firms threaten more layoffs in the near future unless the government proceeds with support measures. All in all, the budget for 2021 is sure to arouse avid interest among investors.
Later in the American session, the Federal Reserve will release the Beige Book which is likely to be neglected by traders.
GBP/USD – 4H.
In a 4-hour chart, GBP/USD reversed upwards after the bullish divergence was formed near the CCI indicator. However, a breakout from the correction level of 161.8% or 1.3979 will play in favor of the US dollar. So, the price will resume its fall towards 1.3850 and the uptrend line. The overall sentiment is still bullish. If the price fixes above 161.8%, there will be a higher likelihood of a further climb towards 1.4126.
GBP/USD – Daily.
In a daily chart, the pair closed below 127.2% Fibonacci or 1.4084. Hence, traders reckon some dip for a while. At present, a 1-hour and 4-hour charts provide more accurate data for GBP/USD.
GBP/USD – Weekly.
According to a weekly chart, GBP/USD closed above the second upward trendline. It means that the sterling has a high chance for a long-term bullish trend.
Economic calendar
On Tuesday, the economic calendar for the UK and the US was absolutely empty. So, the information background made no impact on market sentiment.
Om March 3, the following news is due:
The UK – services PMI (09-30 GMT)
The UK – the Chancellor of the Exchequer will speak on the budget plan for the forthcoming fiscal year (12-30 GMT)
The US – ADP employment change (13-15 GMT)
The US – composite ISM non-manufacturing PMI (15-00 GMT)
COT report (Commitments of traders):
The latest COT report on GBP/USD from February 23 reveals bullish prospects for GBP. In the reported week, speculators opened 7,243 new long contracts on GBP/USD and closed nearly 2,000 short contracts. Thus, the market sentiment was striking bullish that coincides with the ongoing developments on GBP/USD. However, a few days later which were not included in that COT report, the sterling dropped. So, traders are anticipating the next COT report. Meanwhile, the overall picture is in the GBP favor as traders under the non-commercial category are still increasing their long bets.
Outlook for GBP/USD and trading tips
On Wednesday, it would be a good idea to buy GBP in case the pair closes above the trend channel with the target of 200.0% or 1.4063. Short positions could make sense depending on the information background today. If traders find out something negative from the UK, the currency pair could resume its decline towards 1.3840.
Terms
The Non-commercial category includes major market players: banks, hedge funds, investment funds, private, and large investors.
The Commercial category embraces commercial enterprises, firms, banks, corporations, companies that buy currency not to obtain speculative profit, but to ensure current activities or export-import operations.
The category of Non-reportable positions means small traders who do not have a significant impact on the price.