GBP/USD - 24H.
The GBP/USD currency pair has adjusted by 450 points over the past two weeks, however, this downward movement looks ridiculous compared to even the last round of the upward movement, which took five months. On the 24-hour timeframe, the quotes of the pound/dollar pair managed to gain a foothold only slightly below the critical line, however, this week they have already returned to the area above this line. Thus, if the European currency has adjusted quite seriously against the dollar in the first two months of 2021 and now has the full moral right to start a new upward trend, then the pound sterling has adjusted again "for a show". We are tired of wondering why the pound has grown so much over the past year and, most importantly, why it can't even adjust normally. This is a rhetorical question. The main thing is that the trend persists and it seems that the "speculative factor" plays an important role in its formation. One way or another, but at this time, the upward trend can be considered renewed. Therefore, in the near future, the bulls may try to return the pair to 2.5-year highs near the level of 1.4240 and update them.
COT report.
During the last reporting week (March 2-8), the GBP/USD pair fell by 100 points. Although the British currency has been declining in the last two weeks, it is unlikely that anyone can now conclude that the upward trend has ended. In principle, the illustration above shows everything perfectly. Moreover, just in the last 5-6 weeks, professional traders are actively buying the pound. This is indicated by the green line of the first indicator, which shows the change in the net position of a group of "Non-commercial" traders. At the same time, the Commercial Group is increasing sales contracts. And this behavior of the two main groups of traders is the main sign of a strong trend. Thus, we see the strongest uncorrelation of the two main pairs. If the European currency has been adjusted for two and a half months, the pound has not. If the COT reports on the euro indicate a weakening of the "bullish" mood, then the COT reports on the pound are saying the opposite. Thus, the main thing now is not to try to assume that the pound and the euro will move in the same way, as is often the case. Unfortunately, there are no unambiguous factors for why the euro and the pound are moving differently now. After all, if they are not correlated, it means that in the Eurozone or the UK, there are now global factors that have a strong impact on one or the other currency. The UK is now receiving one negative, but the pound is growing much stronger than the euro. Could there be a problem in the Eurozone? But there's not much disappointing news coming in from there. Well, is it worth saying that the euro and the pound did not react equally to the growth factor in the yield of American treasuries? Thus, in general, we believe that the COT reports on the pound speak in favor of continuing the upward movement.
During the current week, there were almost no interesting events in the UK. At the beginning of the week, the Chairman of the Bank of England, Andrew Bailey, made a speech, which did not tell the markets anything interesting. Only on Friday, several rather important reports were published in the Foggy Albion, which should have supported the pound, but, instead, put pressure on it. Although it would be better to say that this statistic was again ignored by the markets. More attention was paid to the American statistics, however, the statistics themselves were even less. The markets were interested in the inflation report on Wednesday, but how should it be interpreted if the main indicator rose from 1.4% y/y to 1.7% y/y, and the base indicator, on the contrary, fell from 1.4% y/y to 1.3% y/y? Thus, it is extremely difficult to determine which fundamental factors currently affect the pound/dollar pair in general. Based on the growth factor of the money supply in the US, we believe that the pound may well continue its growth although there was no normal correction, or that the pound is very much overbought. However, as before, we recommend always trading according to the technical picture.
Trading plan for the week of March 15-19:
1) The pound/dollar pair has returned to the area above the critical line on the 24-hour timeframe, so now the upward movement is again relevant. However, at the same time, on the lower timeframes, the new upward trend does not look too convincing yet. Therefore, if the pair returns below the Kijun-sen line, it will mean a new attempt by the bears to correct it in the long term.
2) Sellers seem to have let the initiative out of their hands, but at the same time, on the hourly and 4-hour timeframes, the bullish trend looks very ambiguous due to Friday's fall "out of the blue". Thus, the technical picture is very ambiguous at this time, and all timeframes allow for different movement options in the near future.
Explanation of 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 before.
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.