GBP/USD 15M
Both linear regression channels are directed to the downside on the 15-minute timeframe. Thus, there is a weak downward trend in the short term. Since the price has now dropped on both channels, we can expect a slight upward retracement, afterwards a new round of downward movement will take place. The probability of a rebound from the 1.3700 level is high.
GBP/USD 1H
The GBP/USD pair traded quite calmly on Monday, January 25. A day earlier, it left the rising channel, thereby formally forming a downward trend. However, as we can see, the price did not fall that far and at the moment, it continues to be located near its 2.5-year highs. Thus, it is preferable to trade for a fall now. To do this, you need to wait for new trading signals. For example, rebounds from resistance levels built on the previous highs like 1.3700 and 1.3745. Failure to settle above any of these levels can provoke a new round of downward movement, which is recommended to be worked out. Although, from a fundamental point of view, the pound's growth remains completely unfounded, corrections must occur from time to time, the pair cannot constantly move in one direction. At the moment, the last correction is as much as 110 points, which is very small. Thus, we should see another round of downward movement today. Otherwise, when the upward movement resumes, you are advised to trade bullish when overcoming the 1.3745 level.
COT report
The GBP/USD pair rose by 70 points during the last reporting week (January 12-18). It doesn't seem like a lot, but the growth is stable. But the latest Commitment of Traders (COT) report was disappointing again. Recall that over the past two to three months, the vast majority of reports indicated minimal changes. In most cases, professional traders tended to close contracts for the pound, both for buying and selling. Only the penultimate report showed that the number of buy contracts (longs) increased by 10,460 at once, which is a lot. The latest report showed that non-commercial traders have returned to their favorite pastime - a sluggish reduction in the number of contracts. 2,000 buy contracts and 3,100 sell contracts were closed. Thus, the net position for the "non-commercial" group of traders has become more bullish. However, the indicators show a completely different picture. While the numbers from the COT report could tell traders that the upward trend was maintained (and it is), the indicators show that the mood of non-commercial traders changes about once a month. The green line of the indicator (net position of the non-commercial group) constantly changes its direction of movement and intersects with the red line (net position of the commercial group), which, in fact, means that there is no trend. However, there is a trend, and the changes displayed by the COT report are minimal and do not allow any long-term conclusions to be drawn.
No interesting news from the UK on Monday. Bank of England Governor Andrew Bailey was scheduled to speak on this day, but during his speech at the international forum in Davos, he talked about digital currencies and their impact on the economy in a pandemic. Foreign exchange market participants are not very interested in this topic, like many others during the global crisis and pandemic. Thus, we can assume that there were simply no important events yesterday.
Britain will publish the unemployment rate, average wage, changes in the number of applications for unemployment benefits on Tuesday. These reports are not of the first degree of importance, but they are still very interesting. For example, unemployment, according to experts' forecasts, may rise to 5.1% by the end of November, and wages - to grow by 3.0%. It is also expected that the number of workers in the UK decreased in October by 100-160,000. Thus, the expectations are not the best, but if the pound had paid attention to the statistics and the foundation, it would have been trading around the 1.2500 level for a long time. The market is now ruled by other factors that do not lie on the surface.
We have two trading ideas for January 26:
1) The price left the ascending channel, so we now have a downward trend. However, at the same time, the pair can resume the upward trend at any time. Therefore, you are advised to trade bullish in case of a false breakout of the 1.3606-1.3626 area with targets at 1.3700 and 1.3745. Take Profit in this case will be up to 100 points. Otherwise, you can consider new long positions when the price has surpassed the 1.3745 level, which is the previous local high.
2) Sellers tried to start a new downward trend, but so far, with grief, they managed to take the pair down 100 points. Thus, you should consider short positions when the price rebounds from the 1.3700 level while aiming for the support area of 1.3606-1.3626 and the Senkou Span B line (1.3584). Take Profit in this case will be up to 100 points.
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.
