GBP/USD 5M
The GBP/USD pair was trading in the classic horizontal channel on Friday. The pair has been between the levels of 1.3362 and 1.3431 all day, while it managed to reach both levels. In principle, a correction after two such active days suggested itself. We even counted on a bigger increase in the pair. However, traders did not trade too actively on Friday and, most likely, this trading mode will be extended to Monday. There were no important reports or any other events in the UK on Friday. All the most interesting things for the British currency were a week earlier, and will also be this week. We are referring to the meeting of the Bank of England, at which, quite likely, the key rate will be raised again, for the second consecutive month. Reports were published on changes in personal income and expenses of the US population, as well as an index of personal consumption expenditures. In general, all three indicators were weak, but they were in line with forecasts. The consumer sentiment index from the University of Michigan turned out to be slightly worse than the forecasts: with a forecast of 68.8, it was 67.2. However, traders reacted to these far from the strongest reports quite zealously: the US dollar fell by about 50 points. But in general, there was still a sideways movement to a greater extent. Nevertheless, one excellent trading signal was formed on Friday, which made it possible to earn very well. The rebound from the extreme level of 1.3362 (with an error of 1 point) was a buy signal, and quite strong. Therefore, it should be practiced with a long position. After the formation of this signal, the pair went up 55 points, but, unfortunately, failed to reach the level of 1.3439. However, even in the late afternoon, traders could manually close this deal and still make a profit of at least 20 points. No more signals were generated during the day.
COT report
The latest Commitment of Traders (COT) report on the British pound signals only one thing: the end of the downward trend. Thus, we can at least conclude that the downtrend is nearing its end. The green line of the first indicator (the net position of the "non-commercial" group) first moved to zero from top to bottom, therefore it went much below the zero mark, and now it has returned to it. In addition, in recent weeks, the green and red lines have been moving towards each other, which signals the end of the trend. In our case, a downward trend. Thus, even if the British pound continues to fall to the previous low, the trend may still end in the near future. Or, COT reports should again begin to indicate an increase in the bearish mood among professional traders. At the moment, COT reports suggest that the mood of the major players remains bearish, but "minimally bearish", so to speak. The trend is now to strengthen the bullish intentions. Thus, we now expect the pound to fall to the level of 1.3162, but this round of decline may be the last.
We recommend to familiarize yourself with:
Overview of the EUR/USD pair. January 31. The ECB has often focused on the Fed before, but not this time. The ECB meeting will not give anything to the markets.
Overview of the GBP/USD pair. January 31. The Bank of England may raise the key rate to 1% by May this year.
Forecast and trading signals for EUR/USD on January 31. Detailed analysis of the movement of the pair and trading transactions.
GBP/USD 1H
The pound/dollar pair as a whole maintains a downward trend on the hourly timeframe. Currently, there are already two descending trend lines, each of which supports bears. As long as the price is below both, as well as below the critical line, the bearish mood remains. As of January 31, we highlight the following important levels: 1.3276, 1.3362, 1.3439, 1.3489. The Senkou Span B (1.3590) and Kijun-sen (1.3439) lines can also be signal sources. Signals can be "bounces" and "breakthroughs" of these levels and lines. It is recommended to set the Stop Loss level to breakeven when the price passes in the right direction by 20 points. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are no major events or publications scheduled for Monday in the UK. The same is true in the US, so today a non-trend movement with low volatility may continue. We expect the pair to correct to the critical Kijun-sen line and the trend line. Then everything will depend on the results of the Bank of England meeting on Thursday. If the BoE raises the key rate, then we can expect further growth of the pound. And on Friday, a report on Nonfarm companies in the United States may have an impact.
Explanations for the chart:
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.