5M chart of GBP/USD
On Friday, the pound followed the euro's example. GBP started to fall at the beginning of the European trading session. But in the pound's case, it seems logical. The UK also released PMIs in the services and manufacturing sectors, which turned out to be weaker than expected and could have provoked the fall. However, technical factors should not be ignored either. The pound has been actively rallying for some weeks now, and on Thursday, it broke the ascending trend line. That's why we had a sell signal, and the bearish correction was long overdue. Also, don't forget about the global fundamental background, which is evidently not supportive for the pound's further growth (as well as the European one). I think that the fall of both pairs is still the most probable scenario.
Speaking of trading signals, there were only two, and they weren't appealing. At first the pair bounced from 1.2269, but it was a very delicate moment. There was a higher probability of losing more than actually gaining profit from it (there was a low probability of the pair's further growth after crossing the trend line). And the position had to be closed below the critical line in case it went the wrong way. Therefore, such a signal should not be processed. The next sell signal was better, and the price almost reached the target level of 1.2185. Unfortunately, there was no clear breakthrough of this level, so the position could be closed manually anywhere. Traders could earn several dozen points of profit from it.
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
On the one-hour chart, GBP/USD broke through the trend line, so now it may correct for a few days. Since we still have a flat on the 24-hour view, the quotes may quite freely fall by 300-400 pips in the near future, even without a corresponding fundamental background. The first target is the Senkou Span B line. On March 27, 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. The Senkou Span B (1.2101) and Kijun Sen (1.2260) 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. On Monday, Bank of England Governor Andrew Bailey will give a speech in Britain, which might be interesting. It is likely that the topic of monetary policy will be touched upon and it is also the most important topic for the British pound right now. Especially amid the increase in the Consumer Price Index.
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.