23.02.202105:20 Forex Analysis & Reviews: Forecast and trading signals for GBP/USD on February 23. COT report. Analysis of Monday. Recommendations for Tuesday


Exchange Rates 23.02.2021 analysis

Despite the absence of important news and macroeconomic statistics, the GBP/USD pair continued its upward movement on Monday, as if nothing had happened. However, we have already reiterated that the pair's growth is speculative, approximately the same as we have seen in recent months for bitcoin. Thus, it can continue as long as it wants. Unfortunately, speculative growth is very poorly predicted by technical analysis. If there are clear corrections in ordinary trends, then in our case the corrections are very chaotic, they do not reach the targets, and trend lines and channels are generally ignored. It is very inconvenient to trade the pair in such conditions, despite the strong upward trend. Therefore, we advise you to be careful with any positions. Of course, selling the pair on such a strong trend does not make any sense at all. Moreover, several breaks of the trend lines did not lead to either a strong correction or a downward trend. In the previous review, we advised you to buy the pair if it rebounds from the Kijun-sen line. However, over the past two trading days, it did not even come close to this line. Therefore, no signals were generated. Selling the pair, as we have already mentioned, is not advisable right now.


Exchange Rates 23.02.2021 analysis

Both linear regression channels are directed to the upside on the 15-minute timeframe, so the short-term trend is still up. However, it cannot be otherwise, given the strong upward movement on the hourly timeframe. So now the bulls need to overcome the resistance level of 1.4083 in order for the upward movement to continue.

COT report

Exchange Rates 23.02.2021 analysis

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 reports from the UK on Monday. In principle, there was not a single event or news that could provoke a round of new purchases for the British currency. But traders should have gotten used to this long ago, as we have repeatedly noted the illogicality of such an abnormally sharp strengthening of the UK currency. Moreover, we are not even talking about the last weeks, but the last five months. So now the foundation and macroeconomics, in principle, play a small role in the exchange rate.

The UK will release the unemployment rate on Tuesday, which may start to rise. This has been talked about for a long time, although a growth closer to March was mentioned. Nevertheless, according to analysts' forecasts, unemployment may rise to 5.1% in December. A report on wages and the number of applications for unemployment benefits will also be published. But on the whole, we would say that there is a low probability that all these reports are likely to influence the mood of traders.

We have two trading ideas for February 23:

1) Bulls continue to hold the initiative in their hands. Thus, the upward movement has been resumed, but it is not known how long it will continue. The pair is now moving very illogically and ignores technical signals. In case the price clearly rebounds from the Kijun-sen line (1.3945), you can consider opening long positions while aiming for the resistance level of 1.4083. Take Profit in this case can be up to 110 points. You can consider longs and aim for 1.4162 in case the price surpasses 1.4083. But, as we mentioned, a correction can unexpectedly start.

2) Sellers consolidated the pair below the trend line and immediately gave up and retreated from the market. Therefore, new short positions are not recommended now, although the pair may start a new round of the downward correction. You can only consider shorts and aim for 1.3877 in small lots when the price is below the critical line (1.3945).

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.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Paolo Greco,
Analytical expert
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