1-hour chart for GBP/USD
On Thursday, GBP/USD sharply resumed an upward move which rests on nothing. In fact, we have already got used to such erratic and illogic moves of the pound sterling which has been advancing steadily for no reason. In fundamental articles, I highlighted the fact that such a steady rally looks like a rally of bitcoin or oil prices. I mean, there are cases when an asset (or a currency) sets about a dazzling bullish run for a long time without any reason. Let me stress there are no visible reasons behind such growth, but traders can do nothing about it. This kind of movement is termed speculative. In essence, traders buy robustly an asset (or a currency) aiming to earn on a price difference. In simple words, they want to buy at lows and sell at highs. There is a multitude of such traders. More and more market participants are watching this unreasonable growth and are eager to join the market. They actually enter the market, thus boosting demand for the sterling, so that its value gets inflated. This is what exactly is happening to the pound sterling.To sum up, GBP/USD has already formed the third upward trendline which could end up like the two previous ones. Today, the sterling was trading higher for the whole day. Now we should wait for a retracement downwards and a new buy signal. So, let's hope that the price will not break again the trendline to cancel it and resume the upward move later.
On Thursday, the UK did not release any macroeconomic reports. There was no news on the political front as well. Lately, GDP data and the CPI were rather strong. So, they contributed to the bullish move of the sterling. At the same time, we should confess that the British pound would have appreciated without such reports. The focal point in the UK is new mutant strains of the coronavirus which have been detected in the country. At least two such strains have been found out in the Kingdom. They are more contagious and perilous than the original COVID-19. Nevertheless, the sterling has been immune to such news.
On Friday, February 19, the UK is due to publish retail sales data as well as the services and manufacturing PMIs. Retail sales are expected to contract in January. Business activity in the service sector is likely to remain soft last month, though the PMI could have climbed to 42.3. Thus, the time will be ripe for a downward correction of GBP/USD tomorrow, albeit this correction will be short-lived.
The following scenarios are possible on February 19
1)Buy orders have resurfaced again because a new upward trendline has been formed. Hence, beginners are recommended to wait for a downward correction and a new buy signal which looks like an upward reversal of MACD indicator or a price bounce off a new trendline. The targets are resistance levels of 1.3900 and 1.3941.
2)Sell orders are the wrong idea again. To consider short positions on GBP/USD, we should wait until the price surpasses the upward trendline. If this happens tomorrow, the sterling will hardly tumble in response. At present, the price and the trendline are separated by nearly 100 pips.
What's on the chart:
Support and Resistance levels are the levels that are targets when opening buy or sell orders. Take Profit levels can be placed near them.
Red lines are channels or trend lines that display the current trend and show which direction it is preferable to trade now.
Up / down arrows show whether the pair should be traded up or down when reaching or overcoming particular obstacles.
MACD indicator is both a histogram and a signal line. When they are crossed, this signals a market entry. It is recommended for use in combination with trend patterns (channels, trend lines).
Important speeches and reports in the economic calendar can greatly influence the movement of the currency pair. Therefore, during their release, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners in the forex market should remember that every trade cannot be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
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