FX.co ★ GBP/USD forecast for March 9. COT report. Andrew Bailey says about positive post-pandemic UK's economic prospects but warns about challenges ahead.

GBP/USD – 1H.

GBP/USD – 1H.

Hi everyone! Yesterday, on the hourly chart, the pound/dollar pair traded in a narrow sideways channel, which I did not indicate on the chart. Trading was held slightly below the previous sideways channel and near the correction level of 61.8% - 1.3820. Thus, currently, speculators have a different view on the future trajectory of the pound sterling. Besides, the Fibonacci level of 61.8% is weak and it cannot be used for determining market signals. Monday was rather uneventful for the British currency. Notably, the euro incurred losses while the pound sterling remained flat despite the fact that both currencies had similar market positions and news drivers. Bank of England Governor Andrew Bailey delivered a speech yesterday.

He said, "there is light at the end of the tunnel". He also mentioned the falling coronavirus infections and a successful vaccine rollout. "There are reasons to believe that so-called long-term scarring damage to the economy will be lower than in past recessions. If I had to summarize the diagnosis, it's positive but with large doses of cautionary realism," he stressed. Given the improvement in the epidemiological situation, he believes that the economy may get back on track faster. The Bank of England will do whatever is necessary to stimulate economic growth. Unfortunately, Bailey did not address the issue of negative rates, which had long been of interest to traders. There were also no hints of possible changes in monetary policy in the near future. Today, a member of the Bank's Monetary Policy Committee, Andy Haldane, will also make a speech that may contain some hints. Let me remind you that several members of the Board of Governors of the Bank of England have long been of the opinion that the key rate may be lowered in the coming months.

GBP/USD – 4H.

On the 4-hour chart, the pound/dollar pair fell to the uptrend line. The pair did not rebound from it but it failed to close below the trend line either. According to the MACD indicator, a bullish divergence was formed, which points to the likelihood of an upward reversal and the pound's renewed growth to the correction level of 161.8% - 1.3979. If the price closes below the trend line, investor sentiment is likely to become bearish.

GBP/USD – Daily.

On the daily chart, the quotes continue to lose ground in the direction of their upward trend line. In the long term, traders' sentiment is likely to remain bullish.

GBP/USD – Weekly.

On the weekly chart, the pound/dollar pair closed above the second downtrend line. Thus, the pound sterling has a better chance of continuing its bullish movement in the long term

News overview:

On Monday, the macroeconomic calendar lacked any important releases. There was no significant intraday movement for the second day in a row.

Economic calendar for the US and UK:

UK - Bank of England Monetary Policy Committee (MPC) Member Andy Haldane will deliver a speech (13-00 GMT).

US - The economic calendar is bereft of important releases from the US. So, there will be no market-driving news today for the currency. Traders are likely to focus their attention on the speech of Andy Haldane, which may contain some hints about the future of monetary policy.

COT (Commitments of traders):

The latest COT report published on March 2 turned out to be quite interesting for the pound sterling. In comparison with the euro report, investor sentiment for the reporting week has changed dramatically for the pound sterling. The trading sentiment for the euro has become more bearish, while the pound sterling speculators have turned more bullish. This is a very significant difference. Perhaps this is the reason why the euro has been declining for two months, while the pound sterling has been losing in value for only two weeks. The number of traders in the non-commercial category lowered by 11,000. However, the number of long positions decreased by 2,600, and short positions fell by 8.200. Thus, major traders still rely on the growth of the British currency.

Outlook for GBP/USD and trading recommendation:

Long positions can be opened in case the price rebounds from the trend line on the 4-hour chart with the potential target levels of 1.3900 and 1.3980. Short positions can be opened if the price closes below the trend line on the 4-hour chart with the potential target levels of 1.3721 and 1.3625. However, at the moment, neither a clear rebound nor a clear close under the trend line has occurred!

TERMINOLOGY:

"Non-commercial" - major market players: banks, hedge funds, investment funds, private, large investors.

"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy the currency not to obtain a speculative profit but to ensure current activities or export-import operations.

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