GBP/USD 5-Minute Analysis
On Wednesday, the GBP/USD currency pair made another attempt to extend its local upward trend. Unlike the euro, the British pound has demonstrated a genuine upward correction in recent weeks. Last week, there were some fundamental reasons for this growth, and the pound has continued to rise over the past few days. However, it is important to note that the pair remains within a sideways range, oscillating between the 1.2605-1.2620 and 1.2691-1.2701 levels. A new ascending trend line has formed based on the last two lows. Although the pound has corrected enough to potentially resume the six-month downtrend, there are still no signs on the hourly timeframe that indicate the local trend is ending.
On Wednesday, there was nothing noteworthy happening in the UK or the US, as has been the case all week. Market participants found no catalysts to react to, yet they continued to buy the pound for reasons that remain unclear. The euro is supported from falling by a trend line, while the pound is being held up by the 1.2605-1.2620 area. Both currency pairs have ascending trend lines, and until these are broken, a new downward movement is not expected.
For the British pound, only one trading signal was formed yesterday. Volatility has been low lately, so it's no surprise that there have been fewer signals. The price rebounded from the critical line during the European session, triggering a 50-pip rise. The nearest target—the 1.2691-1.2701 area—was reached, allowing traders to profit from the only trading signal of the day.
COT Report
COT reports for the British pound reveal that the sentiment among commercial traders has been shifting consistently in recent years. The red and blue lines, representing the net positions of commercial and non-commercial traders, often cross and generally hover around the zero mark. Currently, these lines are once again close to each other, indicating an almost equal number of long and short positions.
On the weekly timeframe, the price initially broke through the 1.3154 level before declining toward the trendline, which it successfully breached. This breach suggests that the pound's decline is likely to continue. However, there was also a rebound from the previous local minimum on the weekly timeframe, which may indicate a flat market.
According to the latest COT report on the British pound, the non-commercial group opened 4,500 buy contracts and 1,800 sell contracts. As a result, the net position of non-commercial traders increased by 2,700 contracts over the week, which does not significantly benefit the pound.
The fundamental background still does not provide any justification for long-term purchases of the pound sterling, and the currency remains at risk of continuing its global downtrend. This suggests that the net position could continue to decline, indicating further weakening demand for the pound.
GBP/USD 1-Hour Analysis
On the hourly timeframe, GBP/USD continues its upward trend with almost no pullbacks. This may not be the last trend shift within the overall upward correction on the daily timeframe. We still don't see a solid reason for the pound to rise long-term. We wouldn't recommend long positions on higher timeframes and from a long-term perspective. A few recent reports have supported the British currency, but the pound's rise seems overly persistent.
For February 27, the key levels to watch are 1.2237-1.2255, 1.2331-1.2349, 1.2429-1.2445, 1.2511, 1.2605-1.2620, 1.2691-1.2701, 1.2796-1.2816, and 1.2981-1.2987. The Senkou Span B (1.2503) and Kijun-sen (1.2650) lines may also serve as trading signals. It is recommended to place a Stop Loss at breakeven once the price moves 20 pips in the right direction to protect against potential losses if the signal is false. The Ichimoku indicator lines may shift throughout the day, so traders should consider this when identifying trading signals.
On Thursday, the UK economic calendar remains empty, meaning strong morning movements are unlikely. In the second half of the day, the US will release important reports on GDP and durable goods orders, but the pound has been showing growth lately, even without macroeconomic reasons.
Illustration Explanations:
- Support and Resistance Levels (thick red lines): Thick red lines indicate where movement may come to an end. Please note that these lines are not sources of trading signals.
- Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the 4-hour timeframe to the hourly timeframe. These are strong lines.
- Extreme Levels (thin red lines): Thin red lines where the price has previously bounced. These serve as sources of trading signals.
- Yellow Lines: Trendlines, trend channels, or any other technical patterns.
- Indicator 1 on COT Charts: Represents the net position size for each category of traders.
