GBP/USD: plan for the European session on February 23. COT reports. Pound breaks through new highs amid easing UK quarantine

To open long positions on GBP/USD, you need:

Several excellent signals to enter the market were formed yesterday. Let's take a look at the 5-minute chart and break them down. I drew attention to the 1.3983 level in my morning forecast and advised you to open long positions from it, subject to forming a false breakout, which happened. You can clearly see how the bears are trying to move below 1.3983, but nothing happened. Then, on the next attempt, sellers could not even reach the 1.3983 level, which creates an excellent entry point for those who decided to wait and did not have time to enter on the first signal. As a result: the movement was around 50 points. We fell short of reaching the 1.4047 target level by literally 5 points. Buyers managed to surpass and settle above 1.4047 during the US session, afterwards this level was tested from top to bottom, which created an excellent entry point for continuing the bullish trend. And although we did not reach the target level, the upward movement was more than 35 points, where it was also possible to make good money.

Before examining the technical picture of the pound, let's take a look at what happened in the futures market. The pound remained in demand even despite a slight reduction in long positions. The positive detail increased on the larger reduction in short positions. The Commitment of Traders (COT) report for February 16 revealed a reduction in both long and short commercial positions. Despite this, the bulls break through to new highs each time, taking advantage of the good news on vaccinations in the UK and good fundamentals, indicating economic growth even during the lockdown. The news that the UK will resort to easing quarantine measures in March will further fuel investors' interest in the pound. Long non-commercial positions fell from 60,513 to 60,269. At the same time, short non-commercial positions fell from 39,395 to 38,102, which kept the market bullish. As a result, the non-commercial net position rose to 22,167 from 21,118 a week earlier. The weekly closing price was 1.3914 against 1.3745. Any downward corrections with an immediate buy-back of the pound once again proves the presence of large players in the market. Constant updating of local highs and consolidation on them will further contribute to the bullish trend that we have been observing since the beginning of February this year.

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As for the technical forecast, the initial task is to break through and settle above the resistance level of 1.4117, to which pound buyers should get close to in the morning. Testing this level from top to bottom creates an additional signal to open long positions in continuing the upward trend, which will open a direct road to the area of the new annual high of 1.4186, where I recommend taking profits. The 1.4241 level will be a distant target, however, we can't reach it without good fundamental reports. In the event of a downward correction in GBP/USD this morning, then it is best not to rush into long positions, but to wait for a false breakout in the support area of 1.4047, where the moving averages pass, playing on the side of the bulls. If buyers are not active, then I recommend waiting for the 1.3983 low to be tested and buy the pound from there on a rebound, counting on an upward correction of 20-30 points within the day. The lower border of the current upward trend is also located there.

To open short positions on GBP/USD, you need:

The UK will release a report on the unemployment rate, which is unlikely to significantly affect the pair, since we will not know the real figures until the government programs to support the economy and the labor market are curtailed. Therefore, you need to be very careful when trading against a bullish trend. Forming a false breakout in the 1.4117 area will return the pressure to the pair and result in forming a small downward correction in the first half of the day. An equally important task for the bears is to regain control over support at 1.4047. However, this will happen only with a significant deterioration in the UK labor market. Therefore, a breakout and being able to test this level from the bottom up creates an entry point into short positions in hopes to pull down GBP/USD to the area of a low of 1.3983, where I recommend taking profits. The 1.3927 level will be a distant target. In case the pair grows during the European session and bears are not active in the resistance area of 1.4117, I recommend not to rush to sell, but to wait for an update of the 1.4186 high. You can open short positions from there immediately on a rebound, counting on a downward correction of 30-35 points within the day. The next big resistance is seen at 1.4241.

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Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates the pound's succeeding growth in the short term.

Note: The period and prices of moving averages are considered by the author on the H1 chart and differs from the general definition of the classic daily moving averages on the D1 daily chart.

Bollinger Bands

A breakout of the upper border of the indicator around 1.4105 will lead to a new wave of growth for the pound. In case the pair falls, support will be provided by the average border of the indicator in the 1.4010 area.

Description of indicators

  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
  • MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
  • Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
  • Long non-commercial positions represent the total long open position of non-commercial traders.
  • Short non-commercial positions represent the total short open position of non-commercial traders.
  • Total non-commercial net position is the difference between short and long positions of non-commercial traders.
The material has been provided by InstaForex Company - www.instaforex.com

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