FX.co ★ GBP/USD: plan for the European session on February 22. COT reports. You shouldn't buy the pound at current highs. Beware of the 1.4047 level

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

Buyers of the pound did an excellent job, and the buy signal, which I used in my forecast for the second half of the day, worked out completely. Let's take a look at the 5-minute chart and talk about where and how you could make money. The activity indices in the UK came out in the first half of the day, which enabled bulls to surpass resistance at 1.3983. Testing this level from the reverse side (it was after this that I advised you to open long positions in the morning), led to creating an excellent entry point to buy the pound. As a result, the pair quickly rose to the target area of 1.4036, which brought about 50 points of profit. The rebound from the area of 1.4036 also made it possible for us to take around 20 points from the market, however, trading against the trend for the British pound was quite risky.

No important fundamental reports today, so the pound's growth potential will be limited. The optimal scenario for opening long positions in continuing the bull market will be a false breakout in the support area of 1.3983, slightly above which the moving averages also pass, playing on the side of buyers. In this case, one can count on a new wave of growth for the pound and its return to the area of the high of 1.4047, on the break of which the pair's succeeding growth depends. A breakout and being able to test this level from top to bottom will lead to forming a new signal to open long positions in order to update 1.4116, where I recommend taking profits. The succeeding target will be the high at 1.4186. However, before buying the pound at 1.4047, pay attention to the divergence of the MACD indicator, which has been forming since February 18. In this case, gains above 1.4047 will be quite limited, and a breakout of 1.4047 could lead to a false breakout. In case buyers are not active in the 1.3983 area, and the growth should be quite sharp from this level, I recommend postponing long positions until the test of the 1.3927 low, from which you can buy the pound immediately on a rebound, counting on an upward correction of 25-30 points within the day... I also recommend buying GBP/USD immediately on a rebound from the 1.3884 low.

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

The initial task of the bears is to regain control of support at 1.3983, which will not be so easy given the bull market that we are facing. Getting the pair to settle below this level and testing it on the reverse side will create a signal to open short positions in order to return to the 1.3927 area, where I recommend taking profits. The 1.3884 level is a distant target. In case GBP/USD grows in the first half of the day, it is best not to rush to sell, but wait for a false breakout in the 1.4047 area. Divergence on the MACD indicator will be another signal to sell the pound. You can open short positions immediately on a rebound from the high of 1.4117, counting on a downward correction of 25-30 points within the day.

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.

Indicator signals:

Moving averages

Trading is carried out just above the 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 chart and differs from the general definition of the classic daily moving averages on the D1 daily chart.

Bollinger Bands

A breakout of the upper border of the channel in the 1.4042 area will lead to a new wave of growth for the pound. A breakout of the lower boundary at 1.3983 will increase pressure on the pair.

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.