GBP/USD: plan for the European session on February 26. COT reports. Pound plummeted from highs, bears looking for a trend

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

The second half of yesterday was much more interesting than the first. Let's take a look at the 5-minute chart and talk about what happened. And although the upward movement from the 1.4119 level was quite good, I was still waiting for the signal to be confirmed by a false breakout, or at least by a test of the 1.4119 level. There was neither one nor the other. Therefore, I was forced to miss this signal. Then focus moved to resistance at 1.4186, but I did not wait for it to be tested in the afternoon, not to mention a false breakout and a buy signal. About 3 points short of the 1.4185 update. A sharp drop in the pound, which started in the second part of the US session, led to a breakout and so the pair settled below support at 1.4119. Then the pair stood under this level for a while, but it did not reach a normal test from the bottom up (1.4119), afterwards the price continued to fall. If you managed to get into short positions - congratulations. I was uncomfortable with selling against a bull market at the lowest troughs. The fall led to a test of the low of 1.4055, where I advised buying on the rebound. The pair rebounded by 20 points during the first test. Then, the price surpassed this level, afterwards it approached 1.4055 from the bottom up, but there were not enough, just 3 points to test it, which resulted in creating a sell signal. In general, yesterday I was quite lacking in correctly interpreting the emerging situation. It is quite difficult to do this in such a market.

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Today we can wait for representatives of the Bank of England to talk. No other important fundamental statistics on the UK. It is possible that the bears will continue to put pressure on the pound, which may ultimately lead to a complete reversal of the upward trend. To prevent this, buyers need to protect support at 1.3983, where forming a false breakout will be a signal to open long positions in order to return the pound to the resistance area of 1.4048. An equally important task is to surpass and be able to settle above this range, testing this area from top to bottom can create an additional buy signal for the purpose of reaching 1.4115, where I recommend taking profits. Moving averages that play on the side of sellers also pass there. If buyers are not active in the 1.3983 area, then I recommend holding back from long positions until the 1.3911 low has been tested, from which you can buy the pound immediately on a rebound, counting on an upward correction of 25-30 points within the day. The next level to buy is seen in the area of 1.380, a test of which will mean a reversal of the upward trend.

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

The initial task of the bears is to regain control of support at 1.3983, which they already tested in today's Asian session. Such a sharp change in the alignment of forces coerces speculative traders to leave the market, which can weigh on the pair this morning. Consolidating below the 1.3983 level and testing it from the reverse side (similar to selling, which I analyzed above) can create a signal to open short positions in order to pull down the pair to the 1.3911 area, where I recommend taking profits. The succeeding target will be the 1.3840 level. In case GBP/USD grows in the first half of the day, it is best not to rush to sell, but wait for a false breakout in the 1.4048 area. I recommend opening short positions immediately on a rebound but only from a high of 1.4115, counting on a downward correction of 30-35 points within the day.

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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 updates of local highs and consolidation on them will contribute to the bullish trend that we have been observing since the beginning of February this year.

Indicator signals:

Moving averages

Trading is carried out below the 30 and 50 moving averages, which indicates a succeeding decline for the pound 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

In case the pair falls, support will be provided by the lower border of the indicator in the 1.3940 area. A breakout of the average border of the indicator in the 1.4070 area will lead to a new wave of growth for the pound.

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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