31.03.2023 08:05 AM
GBP/USD: Forecast and trading signals on March 31. COT report. Detailed analysis of price movement and trades. The moment of truth for the pound

5M chart of GBP/USD

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On Thursday, GBP/USD also stretched its upward movement. Volatility was not as strong as the euro, and the pound did not have any reasons to rise at all. If the German inflation report had little to do with the euro, then it certainly had nothing to do with the pound. Nevertheless, the British currency still rose. But is anyone even surprised? The US published its Q4 GDP report, but there was nothing surprising about it and the values completely matched the forecasts. Besides, the report was released in the afternoon, while the pound was already rising in the morning. It's not even necessary to talk about the fact that the US economy showed strong growth in Q4, which should have triggered the dollar's growth. Thus, the pound continues to rise for no reason in the short term. It has already come close to 1.2440, which is the upper limit of the horizontal channel on the 24-hour view. There might be a pullback and not a less strong fall from it.

There were three trading signals on Thursday, all three of which were false because the pair decided to take a break near 1.2342. Traders could work out only the first two signals, but this, in principle, does not really matter, because the price did not even pass the right direction by 20 points in both cases.

COT report:

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For the British pound, the Commodity Futures Trading Commission has caught up with the lost time and has now released reports exactly on time. The last report available is for March 21. According to that report, the non-commercial group closed 3,700 long positions and 500 short ones. Thus, the net position of non-commercial traders decreased by 3,200 but continues to grow. The net position indicator has been steadily growing over the past months but the mood of major traders still remains bearish. Although the pound sterling is growing against the dollar (in the medium term), it is very difficult to answer the question why it is doing this from a fundamental point of view. It is quite possible that the pound sterling may slump in the near future. Formally, it has already begun its downward movement but so far it looks more like a flat. Notably, both major pairs are moving similarly at the moment. However, the net position for the euro is positive and even implies the imminent completion of the upward momentum, whereas for the pound it is negative, which gives rise to expectations of further growth. But at the same time, the pound has already grown by 2100 points, which is a lot, and without a strong bearish correction the continuation of the growth will be absolutely illogical. The non-commercial group opened a total of 49,000 shorts and 28,000 longs. We remain skeptical about the long-term growth in the British currency and expect it to fall deeper.

1H chart of GBP/USD

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On the one-hour chart, GBP/USD has overcome the trend line, but easily resumed the uptrend and rose for the fifth straight day. The pair continues to rise and it doesn't stop. So far it can be written off as a horizontal channel in the 24-hours view, but overcoming 1.2440 will bring the pair out of the flat on the daily chart. So, the "moment of truth" is coming. On March 31, it is recommended to trade at the key level of 1.1927, 1.1965, 1.2143, 1.2185, 1.2269, 1.2342, 1.2429-1.2458, 1.2589, 1.2659. The Senkou Span B (1.2175) and Kijun Sen (1.2320) lines can also generate signals. Rebounds and breakouts from these lines can also serve as trading signals. It is better to set the Stop Loss at breakeven as soon as the price moves by 20 pips in the right direction. The lines of the Ichimoku indicator can change their position throughout the day which is worth keeping in mind when looking for trading signals. The first report of the week will finally be released in the U.K. - fourth quarter GDP. In the US, there is just some minor data which is unlikely to affect traders' mood. As a whole, all of today's reports are unlikely to influence traders' desire to buy.

Indicators on charts:

Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals.

Kijun-sen and Senkou Span B are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines.

Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals.

Yellow lines are trend lines, trend channels, and any other technical patterns.

Indicator 1 on the COT chart is the size of the net position of each trader category.

Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.

Paolo Greco,
Analytical expert of InstaForex
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