FX.co ★ Outlook for GBP/USD on February 25. COT report. BoE unveils pessimistic report on monetary policy

GBP/USD – 1H.

Good afternoon, dear traders! On the one-hour chart, we can see that the pound/dollar pair advanced to 1.4190 and dropped from it. Recently, the British pound has not been losing more than 100-150 pips. The current uptrend is really strong. However, the reasons for such a rally are still unknown. Besides, it is still difficult to explain why the quote dropped after reaching the level of 1.4190.

This week, Jerome Powell has already provided two speeches that could have led to changes in the market. However, at that moment, the pound/dollar pair was trading against the forecast. Notably, the pound sterling resumed rising and now, it is approaching the level of 1.4190. A rebound from this level may lead to a drop towards the 200.0% correctional level located at 1.4063. The current market sentiment is bullish.

Yesterday, Andrew Bailey, Governor of the Bank of England, also provided a speech. Concerns about the future of the UK economy and unemployment were the main issues of the speech. The Bank of England emphasizes that unemployment may rise in the few next months, if the government stops supporting households and businesses. Bailey also mentioned the conflict in the EU concerning the UK financial companies. The fact is that these companies cannot receive full access to the EU financial market. Bailey supposes that the European Union requires the UK companies to do more than its other partners should do. However, in general, this monetary policy report cannot be called extremely important.

GBP/USD – 4H.

On the four-hour chart, the pound/dollar pair closed above the level of 1.4126. After that, it dropped and resumed rising towards the 200.0% correctional level of 1.4287. The current market sentiment is bullish. The pound sterling continues showing ambiguous trading, ignoring the news flow.

GBP/USD – Daily.

On the daily chart, the pair closed above the 127.2% Fibonacci level of 1.4084. That is why the pair is likely to go on soaring towards the 161.8% correctional level of 1.4812.

GBP/USD – Weekly.

On the weekly chart, the pound/dollar pair closed above the second downward trend line. Thus, the likelihood of the long-lived advance is increasing.

News review

On Wednesday, the US and the UK economic calendars contained just schedules of speeches provided by governors of their central banks. There were no economic reports on February 24, 2021.

Macroeconomic calendar for the US and the UK:

US - Gross Domestic Product (13-30 GMT).

US - Durable Goods Orders (13-30 GMT).

US - Unemployment Claims and Continuing Claims (13-30 GMT).

On February 25, the UK will not publish any macroeconomic report. All eyes will be turned to the US data releases. However, the data will hardly influence the pound/dollar pair.

Commitments of traders report:

The latest COT report on the British pound and the euro was really boring. In the given period, non-commercial traders opened 369 long positions and closed 3,308 short positions. Thus, speculators' sentiment became more bullish, pushing the pound sterling higher. In general, all market players opened almost the equal number of long and short positions. Despite some changes, the British pound continues growing.

Outlook for GBP/USD and recommendations for traders:

Earlier, we recommended opening buy positions after a close above 1.3979 on the four-hour chart. New buy positions should be opened, if the pair closes above the level of 1.4190 on the four-hour chart with the target of 1.4287. Sell positions could be opened, if the price fixes below the upward trend channel on the one-hour chart with the targets of 1.3895 and 1.3820.

Terminology

"Non-commercial" traders are major market players such as banks, hedge funds, investment funds, private, and large investors.

"Commercial" traders are commercial enterprises, firms, banks, corporations, companies that buy foreign currency not for speculative profit, but to support current activities or export-import operations.

"Non-reportable positions" are small traders who do not have a significant impact on the price.