Yesterday, the GBP/USD currency pair almost completely recovered after Wednesday's losses. Recall that on Wednesday the US released a fairly strong ISM index in the manufacturing sector, however, in the last article we questioned the validity of such a strong dollar strengthening on a generally not very strong report. But on Thursday, traders decided to return the debt to the pound and actively bought it during the day, although important macroeconomic statistics were not published in the UK in the morning, and the only report of the day that traders should have paid attention to was the US ADP report, which turned out to be weaker than forecasts, but practically did not provoke any reaction of traders. It turns out that yesterday the mediocre ISM index provoked the growth of the dollar by 100 points, and today an equally important report on the labor market did not provoke even 20 points of movement! Precisely on the basis of understanding this fact, we believe that at this time technique is still the most important factor. Simply put, yesterday we saw a retracement against a retracement. Earlier, the pair settled below the trend line, so now we have a downward correction on the chart. So far, everything is going according to the "technical plan", and the foundation may intervene in what is happening just today, when the most important reports will be published in the United States.
Only one trading signal was formed on Thursday. However, even one of them was enough for traders to get excellent profits. The pair started rising at night, but crossing the Senkou Span B line made it possible to open long positions. Subsequently, the pound almost reached the critical line, and by evening it was at a distance of about 55 points from the entry point to the deal. So the long positions had to be closed manually and the profits were very good.
The latest Commitment of Traders (COT) report on the British pound showed almost no change. During the week, the non-commercial group closed 700 long positions and opened 500 shorts. Thus, the net position of non-commercial traders decreased by only 1,200. The net position has been falling for three months already, which is perfectly visualized by the green line of the first indicator in the chart above or the histogram of the second indicator. The non-commercial group has already opened a total of 106,000 shorts and only 26,000 longs. Thus, the difference between these numbers is already more than four times. This means that the mood among professional traders is now "pronounced bearish". Note that in the case of the pound, the COT report data very accurately reflects what is happening in the market: the mood of traders is "very bearish", and the pound has been falling against the US dollar for a very long time. In the last two weeks, the pound has started rising, but even in the chart for this paragraph (daily timeframe), this movement looks very weak so far. Since in the case of the pound, the COT report data reflects the real picture of things, we note that a strong divergence of the red and green lines of the first indicator often means the end of the trend. Therefore, now you can really count on a new upward trend. And since the euro and the pound are very often traded in the same way, you can count on an upward trend for the euro. Of course, if the geopolitics or the foundation does not continue to deteriorate.
The pair traded higher on the hourly timeframe. If it resumes its fall, then everything will go according to the "technical plan". Price rebound from the Kijun-sen line - and everything will be perfect, from a technical perspective. If the critical line is crossed, then the pair may begin to move in a "swing" mode over the next few weeks. Today we highlight the following important levels: 1.2259, 1.2405-1.2410, 1.2496, 1.2601, 1.2659, 1.2762. The Senkou Span B (1.2497) and Kijun-sen (1.2555) lines can also be sources of signals. Signals can be "rebounds" and "breakthroughs" of these levels and lines. The Stop Loss level is recommended to be set to breakeven when the price passes in the right direction by 20 points. Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. The chart also contains support and resistance levels that can be used to take profits on trades. There are again no major events or publications scheduled for Friday in the UK. In the United States, we have the most important data on the labor market, unemployment and wages. Naturally, the NonFarm Payrolls report can cause the strongest reaction.
