GBP/USD 5M
The GBP/USD currency pair moved much better on Tuesday than on Monday. Despite the fact a report has not been published in the UK, and there was not a single important event, there was a fairly steady growth of the pound during the day. It turns out that the two main competitors of the US dollar strengthened quite well two days before the meetings of their issuing banks, which will be held on the same day with a difference of a couple of hours. Quite an interesting behavior of the market, especially considering that there is a 99% probability that the decisions that the European Central Bank and the Bank of England will make, as well as the rhetoric voiced by their heads, will differ radically. However, as in the case of the euro, we have what we have. Let's now look at the technical signals and see how we should have traded yesterday. The first buy signal was formed at the very beginning of the European trading session, when the price bounced off the critical line. At this point, traders had to open long positions. Subsequently, the pair went up about 60 points, overcame the extreme level of 1.3489 on the way, and also managed to bounce off it twice. Unfortunately, the first bounce was very inaccurate, and traders could interpret it as a consolidation under the level. In this case, it was necessary to leave long positions and open short ones, which did not bring profit, since the price could not continue to fall. But at the next buy signal, it was necessary to buy the pair again, and this transaction was profitable again. Since the volatility of the pound/dollar pair was average yesterday, we managed to earn only a couple of dozen points. But it's better than nothing. And it is better than a loss in a flat movement.
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. February 2. The euro and the pound cannot get enough of the dollar bulls' retreat.
Overview of the GBP/USD pair. February 2. The British pound is growing more than expected and is waiting for a rate hike.
Forecast and trading signals for EUR/USD on February 2. Detailed analysis of the movement of the pair and trading transactions.
GBP/USD 1H
On the hourly timeframe, the pound/dollar pair overcame the first descending trend line yesterday, as well as the critical line. In addition, the price rose to the second trend line and the Senkou Span line B. Therefore, today will be a kind of "local doomsday" for the pair. If a rebound follows from the trend line and Senkou Span B, then the downward trend will continue. However, on Thursday, the Bank of England will announce the results of the meeting and, most likely, the key rate will be raised. Therefore, we expect a new growth of the British currency... But still, without a technical signal, this is just an assumption. Maybe the BoE will present a surprise. We highlight the following important levels on February 2: 1.3276, 1.3362, 1.3439, 1.3489, 1.3598-1.3607. The Senkou Span B (1.3521) and Kijun-sen (1.3442) 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 interesting events scheduled for Wednesday in the UK. Thus, traders will be able to pay attention only to the report from ADP, which is unlikely to cause at least some reaction from the market. Most likely, the average volatility will remain strong today, and the markets will continue to wait for the results of the BoE meeting.
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.