GBP/USD 1H
The GBP/USD pair continued to trade quite actively on Thursday. The downward correction, it would seem, ended quickly; nevertheless, a new round began in the afternoon. Thus, the bulls temporarily retreated from the market and now the pound may properly fall. Take note that the upward movement that practically had no corrections (strong) lasted for five months. So now traders have the right to expect the pair to fall by 500 points. Of course, in practice, everything may not be as great. The price did not even try to reach the 1.4240 level, and the decline in the afternoon can be considered as strong. Therefore, we conclude that buyers have begun to take profits on long positions. The pound grew long enough and strong enough. In our last article, we advised you to buy the pair while aiming for 1.4162 if the price rebounds from the Kijun-sen line or the 1.4083 level. Such a rebound was executed, and the price subsequently reached the target level, so traders could earn around 45 points. We also recommended buying the pair if the price surpasses 1.4162 and the 15-minute timeframe shows that the price has settled above this level for more than an hour. Accordingly, traders could open new long positions, but this signal turned out to be false (one of three, since in the first and third cases the price did not stay above 1.4162 for more than an hour), so traders could get a dozen points of loss on it. We recommended selling the pair in case the price settles below the Kijun-sen, which also happened during the previous day. However, this deal is still in force and can be sustained. If the price settles below the rising channel, then sell positions can be kept open.
GBP/USD 15M
Both linear regression channels are slightly directed to the upside on the 15-minute timeframe, but in the next few hours they can change their direction to a downward one. In general, everything is heading towards a strong downward correction, and its prospects depend on whether the pair manages to surpass the Kijun-sen line and the rising channel on the hourly timeframe.
COT report
The GBP/USD pair rose by 160 points during the last reporting week (February 9-15). If in the last weekly reviews we said that the pound is gradually getting more expensive and "is not rushing headlong to the upside", now, perhaps, we can say that it is. The latest Commitment of Traders (COT) report for the pound was more or less neutral, however, the bullish sentiment is on the face. This is well signaled by the first indicator in the chart, the green and red lines of which have been moving away from each other in recent weeks. Over the last reporting week (recall that the COT report comes out with a three-day delay), a group of non-commercial traders opened 369 Buy-contracts (longs) and closed 3,300 Sell-contracts (short). Thus, the net position of non-commercial traders increased by almost 4,000. Consequently, major players became even more bullish. In total, professional traders have 62,000 buy contracts and 36,000 sell contracts open. That is, the difference is approximately one and a half times and it has become such in recent weeks. For the euro, for comparison, the difference is three times and the upward movement is much weaker. Thus, even the COT reports say that such a strong and almost recoilless strengthening of the pound is unreasonable. Nevertheless, the upward trend persists and, therefore, you can trade bullish.
No interesting events in the UK on Thursday. But traders unexpectedly reacted to the positive macroeconomic reports from overseas. Of course, this could be a mere coincidence, given how long it has been for a downward correction. Nevertheless, I would like to believe that traders will still pay attention to macroeconomics.
No macroeconomic reports and speeches from the UK on Friday, so technical factors will remain in first place in terms of importance and relevance. It is unlikely that the markets will work out statistics from overseas, since it is much weaker than yesterday's. And we are not sure that whether the US reports had anything to do with the pair's decline, although it was quite strong.
We have two trading ideas for February 26:
1) Bulls continue to hold the initiative in their hands. The pair is now moving very illogically and ignores technical signals. However, in the event of a clear price rebound from the lower line of the rising channel, you are advised to open long positions with targets at the resistance levels of 1.4083 and 1.4162. Take Profit in this case can be up to 120 points.
2) Sellers finally got down to business and pulled the pair away from 2.5-year highs, and also crossed the Kijun-sen line. Therefore, you can open short positions after surpassing the critical line and aim for the lower line of the rising channel. You are advised to open new short positions if the price leaves the rising channel while aiming for levels like 1.3980 and 1.3951, as well as the Senkou Span B line (1.3943). Take Profit in this case can be up to 70 points. The support level 1.3877 also looks like a real target.
Forecast and trading signals for EUR/USD
Explanations for illustrations:
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.
