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GBP/USD – 1H.
Hello, dear traders! On the hourly chart, GBP/USD dropped to 1.3625 - the 100.0% retracement level - rebounded from it and reversed upward. However, it has been unclear so far whether the price will return to 1.3744 - the 127.2% Fibo retracement. Alternatively, the pair may close below the level of 1.3625. If so, the price may extend its downward movement to 1.3570 and 1.3522. Meanwhile, traders await the outcome of the Board meeting of the Bank of England, which is to take place tomorrow. Trading on GBP/USD has been relatively calm ahead of the event. It is not surprising since traders do not expect any changes in the monetary policy. Nevertheless, the situation around the BoE has been stressful lately. The point is that the British economy needs support from the government. The UK has been through three national lockdowns. Therefore, it is unlikely to recover on its own, taking into account Brexit.
However, the Bank of England has been contemplating negative interest rates for a couple of months. Still, the regulator seems to be unprepared to take such a step. Thus, market participants will focus their attention on the outcome of the meeting and Governor Andrew Bailey's speech. If Bailey hints that the central bank will do everything possible to avoid negative interest rates or they will be introduced for a short term, it may lead to the strengthening of the pound. Otherwise, the pound will not be brought under pressure. If Bailey says that the key interest rate is now below zero, the pound may fall below 1.3625.
GBP/USD – 4H.
Based on the H4 chart, GBP/USD closed above the ascending trend line. However, as clear from the chart, the price has formed a sideways corridor. Currently, the price is located near the corridor's lower border. In case the pair rebounds from it, it may well go up to the upper border of the corridor. At the same time, if the price closes below the rectangle, traders may expect the downward trend to extend to 1.3481 - the 100.0% Fibo retracement.
GBP/USD – Daily.
According to the daily chart, the pair consolidated above 1.3513 - the 100.0% retracement level - and rebounded from it. Thus, the price may climb to 1.4084 - the 127.2% Fibo retracement.
GBP/USD – Weekly.
On the weekly chart, GBP/USD closed above the second descending trend line. As a result, the upward trend is likely to be long-term.
Round-up:
On Tuesday, the macroeconomic calendar was completely empty both in the US and the UK. Thus, there was no information background on that day.
Reports to be released in US and UK on February 3, 2021:
UK - Services PMI
US - ADP employment change, services PMI, ISM non-manufacturing PMI
Commitments of traders (COT) report:
The latest COT report released on January 26 showed some pretty significant changes. To begin with, speculators, as the most important category of traders, employed another strategy and started increasing the number of short positions. Thus, they opened over 6,000 of new short positions. At the same time, speculators opened some 2,500 long positions. Consequently, the sentiment of the Non-commercial traders has become more bearish. Therefore, the pound may well incur losses in the near future. That is, if the price fails to break through 1.3744, the British pound will sharply decrease. In the meantime, speculators can accumulate short positions.
Forecast for GBP/USD and trading recommendations:
One should consider buying GBP/USD when the price closes above 1.3744 on the hourly chart. In such a case, the target is seen at 1.3820. One should enter short when the price rebounds from 1.3744 on the hourly chart. Then, the targets will be set at 1.3698 and 1.3625. Alternatively, one should sell the instrument after consolidation below 1.3625 with the targets seen at 1.3570 and 1.3522.
TERMS:
Non-commercial traders are major market players such as banks, hedge funds, investment funds, private, and large investors.
Commercial traders are commercial enterprises, firms, banks, corporations, and companies that buy currency not to obtain speculative profit, but to ensure current activities or export-import operations.
Non-reportable positions are small traders who do not have a significant impact on the price.
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