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GBP/USD 15M
Both linear regression channels turned to the upside on the 15-minute timeframe, but the quotes "died" near the Kijun-sen line and within the 1.3606-1.3626 range. Once again, let us draw your attention to the 2.5 year highs, less than 100 points. Thus, being able to confidently surpass the 1.3606-1.3626 area will significantly increase the likelihood of a new round of upward movement for the pound/dollar pair.
GBP/USD 1H
If the EUR/USD pair has more or less corrected in recent weeks and is now aiming for a new upward trend, then there was really no correction for the GBP/USD pair. Do not forget that the volatility for the pound has always been higher, so 100 points of movement for the euro and 100 points of movement for the pound are not the same thing. Overall, the pound continues to trade very close to 2.5-year highs. And it is precisely this fact that makes us assume the resumption of the upward trend. Three rebounds from the 1.3700 level should not mislead traders. In practice, double top or triple top patterns rarely lead to a global reversal. Level breakouts are much more common. We believe that this time the 1.3700 level will also be overcome. Although we still believe that the pound's rise in recent months is absolutely and completely unfounded. And at this time, there is also no reason for strengthening the pound. But what can you do if the demand for the dollar remains low?
COT report
The latest COT report, which came out strictly on schedule this time, showed the long-awaited sharp change in the mood of traders. Professional market participants opened more than 10,000 Buy-contracts (longs) and only 3,000 Sell-contracts (shorts). Thus, the mood of the "non-commercial" group, which, we recall, is considered the most important group of traders, has become much more bullish. In turn, this means that the upward movement may continue for the pound/dollar pair. And this conclusion completely coincides with the technical picture that is observed at this time. Thus, as we have warned more than once, any fundamental hypothesis must have specific technical confirmation. If they are not there, then no matter what the foundation is, the pair can continue to move without any response. It is not the foundation that drives the markets; the markets move themselves, but the technique visualizes the behavior of traders. Therefore, in the current situation, technique is prioritized.
No important publications or news from the UK on Tuesday. However, this is clearly seen with how low volatility was for the pair. There was absolutely nothing for traders to pay attention to, which, in principle, is for the best. The foundation, which still has no meaning for market participants, was not misleading. Not even a single signal was created yesterday. For longs, it was necessary to wait for the quote to surpass the 1.3606-1.3626 area. For shorts, the price should rebound from the line Senkou Span B. Neither the first nor the second happened.
The UK will finally publish some more or less significant macroeconomic reports on Wednesday. However, this definition only applies to the consumer price index, which is expected to be 0.5% - 0.6% in annual terms. It's hard to say how traders might react to this value. On the one hand, any increase in inflation in the current conditions is a positive factor. On the other hand, inflation is still very weak, and positive factors are not necessary for the markets to buy the pound. Another speech from Bank of England Governor Andrew Bailey later in the evening, but we think he has already said all he can in his first speech in 2021. Traders still paid attention only to the positive in his speech, and ignored all the negative.
We have two trading ideas for January 20:
1) The "swing" continues for the pound/dollar pair, so now it is generally very difficult to determine who is in control. If the price returns to the area above resistance at 1.3606-1.3626, then you can buy the pound while aiming for 1.3700 (the previous local high). Take Profit in this case will be up to 70 points. You can buy further if the price confidently surpasses the 1.3700 level.
2) Sellers could not keep the pair below the Senkou Span B line (1.3576), so short positions are no longer relevant at the moment. You should consider sell orders again when the price settles below the Senkou Span B line while aiming for the support level of 1.3452, but in general, the pound/dollar pair continues to move without any logic. Take Profit in this case will be up to 100 points.
Forecast and trading signals for EUR/USD
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.
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