GBP/USD 5M
The GBP/USD pair was trading much quieter than the EUR/USD pair on Monday, March 22, which raises certain questions, since usually the opposite is true. However, as we said in the article on the euro, there were no important news and reports on Monday, so in principle everything is logical. The pound/dollar pair also opened the day with a gap to the downside, and there were quite active movements during the Asian session. At least the price didn't stay in one place, as it usually does at night. Movements did not become more active when the European session opened, and new signals did not begin to form. In fact, only one signal was formed during the day - at the very beginning of the US session. This was the only moment when the price reached any important level or line. The rebound from the 1.3830 extremum level turned out to be indistinct, however, almost unambiguous. The price has never settled below this level by more than 3-4 points, and as a result moved upwards from it, so traders could open long positions here. According to our recommendations, we should wait for the development of the Senkou Span B line, which currently lies at the 1.3896 level. The bulls failed to reach this target during the day, the pair went up as a result 30 points. Thus, as night approached, traders could manually close this trade for a small profit. But even if they did not do this, the Stop Loss should have been set to breakeven. Thus, it will not be possible to receive losses on this transaction anyway. The total volatility of the pair for the day was around 60 points, which is very small for the pound, so it is not surprising that there were few signals, and the movements were weak.
GBP/USD 1H
On the hourly timeframe, you can see that on Monday the price hit the updated extremum level (1.3820) twice and bounced off it both times. This gives hope that the upward movement will continue to the Senkou Span B and Kijun-sen lines on Tuesday. We note that this is already the third time the price rebounded from the 1.3820 level, so we can speak of this level as the lower border of the horizontal channel, presumably 1.3820-1.4000. If so, then a new round of the upward movement to the 1.4000 level may begin now. At the same time, overcoming the 1.3820 level will allow traders to expect that the dollar can strengthen further. The UK is set to publish the unemployment rate, the number of applications for unemployment benefits and changes in the average salary. Andrew Bailey, Jerome Powell and Janet Yellen will also speak on Tuesday. As you can see, the day will be very busy in terms of foundation and macroeconomics, so sharp price reversals and rather high volatility are possible. In general, we continue to recommend trading from important levels and lines, when rebounding from them and overcoming them. As before, you should set the Stop Loss level at breakeven when the price passes 15-20 points in the right direction. The nearest level/line is always used as targets.
COT report
The GBP/USD pair rose by 75 points during the last reporting week (March 9-15). However, this growth is very conditional, since, as we have already mentioned, the last two weeks have been in absolute flat for the pound. As for the traders' sentiment, recently the "non-commercial" group continued to increase its net position, which testified to the strengthening of the bullish sentiment. It has only been bearish in the past two weeks, including the latest COT report that came out this Friday. A decline in the net position by 6,000 contracts was recorded a week ago, the new COT report showed a fall by another 6,500. Thus, one could even assume the end of the upward trend, however, pay attention to the movement of the first indicator in recent months. The green and red lines, which reflect changes in the net positions of the "non-commercial" and "commercial" groups of traders, constantly changed the direction of movement and were mostly near the level 0. This suggests that the mood of the major players was constantly changing, and the rate of the pound/dollar pair, meanwhile, moved for its own reasons. Thus, the current "signal" about the possible completion of an upward trend is likely to be false. We remind you that the pound is experiencing huge problems in order to show the downward movement. Markets are stubbornly reluctant to get rid of it, and global fundamentals may trigger a new round of the upward trend in the coming weeks.
Explanations for illustrations:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the "non-commercial" group.
The material has been provided by InstaForex Company - www.instaforex.com