GBP/USD - 24H.
The GBP/USD currency pair continued its upward movement during the current week, as did the EUR/USD pair. But if the euro currency had previously adjusted at least a little, then there was no question of a correction for the pound sterling. The British currency just keeps rising and that's it. From time to time, of course, there are pullbacks, however, there has not been a strong correction for a long time. Even the "high-volatility swing" mode has recently changed to a stable and confident upward movement. All this only suggests that market participants still regard the pound as an attractive currency for investment, and the dollar is not. In past fundamental reviews, we have already published several different hypotheses of a strong fall in the dollar over the past year. There are absolutely no fundamental reasons for this. Therefore, since the current trend is not built on a "foundation", then all the more attention should be paid to technical factors. And technical factors do not even allow the idea that the upward trend may end in the near future. What can prevent it from continuing if its nature is not fundamental? It turns out that the pound will become more expensive as long as it is bought, and the dollar is sold. And no one knows how long it will last.
During the last reporting week (January 12-18), the GBP/USD pair increased by 70 points. It seems to be a little, but the growth is stable. But the latest COT report is again disappointing. Recall that over the past two to three months, the absolute majority of reports indicated minimal changes. In most cases, professional traders sought to close contracts for the pound, with both buying and selling. Only the penultimate report showed that the number of purchase contracts increased immediately by 10,460, which is a lot. The latest report showed that non-profit traders have returned to their favorite activity – a sluggish reduction in the number of contracts. 2 thousand buy contracts and 3.1 thousand sell contracts were closed. Thus, the net position for the "Non-commercial" group of traders has become more "bullish". However, the indicators show a very different picture. If the figures of the COT report could tell traders about the continuation of the upward trend (which it is), then the indicators show that the mood of non-commercial traders changes about once a month. The green line of the indicator (the net position of the "Non-commercial" group) constantly changes the direction of movement and intersects with the red line (the net position of the "Commercial" group), which 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 us to draw any long-term conclusions.
Talking about the fundamental background, especially for the pound/dollar pair, sometimes makes no sense at all. News, events, and reports are all available, however, all these important data do not have any influence on the movement of the pair. Thus, 90% of fundamental events and macroeconomic reports can be viewed out of pure sporting interest or just to keep abreast of what is happening. The last most important events concerned the speeches of several top officials of the UK and US economies. We wrote about Janet Yellen's speech in an article on the euro/dollar. Andrew Bailey also made it clear to the markets that the Bank of England is not going to introduce negative rates in the near future, but he also did not make any optimistic statements. The head of the Bank of England tried to instill optimism in the markets. After all, the pound continues to grow in any case. However, Andrew Bailey promised that the economy is waiting for a rapid recovery and in general "everything will be fine". Even regarding the UK's GDP for the fourth quarter, Bailey said that "it will not change at best compared to the third". However, the macroeconomic indicators continue to signal that if the British economy starts to recover, it will not be in the near future. The second and third "lockdowns" caused damage to the economy, although not as huge as the first. Now, we can say that the world has already learned to live with the pandemic, so the impact on the economy from a full quarantine is less than last spring. Nevertheless, the British economy is shrinking and will continue to shrink, and the American economy continues to recover.
Trading plan for the week of January 24-29:
1) The price keeps the upward trend without any problems. Thus, in the 24-hour timeframe, the target for an upward movement remains at the level of 1.3851. We recommend that you continue to trade for an increase on the higher timeframe as long as the price is above the critical line, and do not try to guess the moment when the upward trend ends. On the lower timeframes, respectively, upward trends are also more important.
2) Sellers are still quite weak. The week before last, the bears tried to seize the initiative, but it ended with only a minimal pullback. Thus, for the possibility of opening short positions, it is now recommended to wait again for the price to consolidate below the critical line. If this condition is met, a downward trend may form on the 4-hour timeframe. The price broke through the important level of 1.3700 this week, which significantly increased the likelihood of further movement to the north.
Explanation of the illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced before.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size 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.
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