FX.co ★ GBP/USD: plan for the European session on February 16. COT reports. Pound breaks through highs, ready to rise towards the 40th figure

To open long positions on GBP/USD, you need:

I paid attention to the 1.3909 level in my morning forecast and advised you to act based on it. Similar recommendations were made for the afternoon. Let's take a look at the 5-minute chart and break down the entry points. We can clearly see that a false breakout is formed with each unsuccessful attempt to surpass resistance at 1.3909, which creates the current to enter short positions. However, more than 15-20 points of downward movement cannot be made, after which GBP/USD returns back to the 1.3909 area. You can count on a downward correction after today's big growth in the Asian session, but subject to a number of conditions, which we will discuss below.

Before examining the technical picture of the pound, let's take a look at what happened in the futures market. The demand for the pound keeps rising even though the pound rose to new highs. The Commitment of Traders (COT) reports for February 9 recorded a sharp increase in long non-commercial positions and a reduction in short ones. This led to a rather strong increase in the positive delta. Bulls are making their way to new highs on good news from UK vaccinations. Last week's UK GDP report only resulted in a larger build-up in long positions, in anticipation of a strong economic recovery in early 2021. Long non-commercial positions rose from 53,658 to 60,513. At the same time, short non-commercial positions decreased from 44,042 to 39,395, which only strengthened the bullish sentiment. As a result of this, the non-commercial net position rose to 21,118, against 9,616 a week earlier. The weekly closing price was 1.3745 against 1.3675. The fact that the bulls held their positions at such high volatility within the week once again suggests that the pair is clearly set to overcome annual highs and quickly return to the 40th figure area by this summer. I recommend betting on the pound's appreciation. As quarantine measures are lifted, which are expected to be phased out in February this year, the demand for the pound will only increase. We are expecting news about the support of the population and the labor market in the UK in March, which is also pushing the pound to growth.

The initial task of the pound buyers is to break through and settle above the resistance level of 1.3954, around which the entire Asian upward movement has stopped today. Testing this level from top to bottom creates an additional signal to open long positions in continuing the upward trend, which will easily open a direct road to the area of the new annual high of 1.3993, where I recommend taking profits. The 1.4036 level will be a distant target, however, one cannot do without a new portion of good fundamental statistics. In the event of a downward correction in GBP/USD this morning against the background of the absence of important reports, then it is best not to rush into long positions, but to wait for a false breakout in the support area of 1.3909, where the moving averages pass, playing on the side of the bulls. If buyers are not active, then I recommend waiting for the 1.3862 low to be tested and buy the pound from there on a rebound, counting on an upward correction of 20-30 points within the day. The lower border of the current upward trend is also located there.

To open short positions on GBP/USD, you need:

Forming a false breakout in the 1.3954 area (similar to yesterday's sales, which I analyzed above) will return pressure to the pair and lead to forming a small downward correction in the first half of the day. An equally important task for the bears is to regain control over support at 1.3909. However, there are no fundamental reasons for this. Therefore, only a breakout and being able to test this level from the bottom up creates an entry point into short positions in hopes to pull down GBP/USD to a low of 1.3862, where I recommend taking profits. There are also moving averages that play on the side of buyers of the pound. In case the pair grows during the European session and bears are not active in the resistance area of 1.3954, then I recommend not to rush to sell, but wait for the 1.3993 high to be updated. You can open short positions from there immediately on a rebound, counting on a downward correction of 30-35 points within the day. The next major resistance is seen only at the 1.4036 area.

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates the pound's succeeding growth in the short term.

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

A breakout of the upper border of the indicator around 1.3954 will lead to a new wave of growth for the pound. In case the pair falls, support will be provided by the average border of the indicator in the 1.3870 area.

Description of indicators

• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
• MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
• Long non-commercial positions represent the total long open position of non-commercial traders.
• Short non-commercial positions represent the total short open position of non-commercial traders.
• Total non-commercial net position is the difference between short and long positions of non-commercial traders.