FX.co ★ GBP/USD. February 22. COT report. The British economy is preparing for high unemployment and additional GDP losses due to Brexit.

GBP/USD – 1H.

According to the hourly chart, the quotes of the GBP/USD pair performed an increase to the level of 1.3976 and closed above it. Thus, the growth process continues in the direction of the next corrective level of 200.0% (1.4063). The rebound of the pair's rate from this level will work in favor of the US dollar and some fall in the direction of the lower border of the upward trend corridor, which characterizes the current mood of traders as "bullish". On Friday, the UK also released business activity indices for services and manufacturing, and traders' attention was also drawn to business activity in the service sector. In the UK, it went a month earlier even below the level of 40, which was already a critical value. However, in February, this index recovered to almost 50, which makes us look to the future with hope. Unfortunately, it is still very difficult for the whole country to look to the future with optimism. Just recently, Finance Minister Rishi Sunak predicted a serious crisis in the labor market. The minister said that the recession in 2020 is the strongest in the last 300 years and it will inevitably pull the unemployment rate up, which in the coming months may rise to record levels. Unemployment is expected to peak in the second quarter of this year at 7.5%. "We have a comprehensive plan to create jobs and support people in crisis. We will issue the next aid package in March within the budget," Rishi Sunak said. At the same time, the British central bank believes that it will be possible to reach pre-crisis levels no earlier than in a year, however, many consider this forecast too optimistic. I also remind you that according to the official data of the European Commission, the UK will lose up to 2.5% of GDP due to Brexit.

GBP/USD – 4H.

On the 4-hour chart, the GBP/USD pair closed above the corrective level of 161.8% (1.3979), which increases the probability of further growth towards the next level of 1.4126. The upward trend line still keeps traders' mood bullish. However, now no one has any doubts that the trend is bullish.

GBP/USD – Daily.

On the daily chart, the pair's quotes performed an increase to the Fibo level of 127.2% (1.4084). A rebound from this level will allow us to expect a reversal in favor of the US currency and a slight drop in the direction of 1.3513. Closing the pair above 127.2% will increase the chances of continuing growth in the direction of the corrective level of 161.8% (1.4812).

GBP/USD – Weekly.

On the weekly chart, the pound/dollar pair completed a close over the second downward trend line. Thus, the chances of long-term growth of the pound are significantly increased.

Overview of fundamentals:

On Friday, the calendars of the United States and Great Britain contained quite a lot of interesting information. For example, a report on retail sales in the UK. However, traders still spent most of the day buying the British dollar, not paying attention to the statistics.

News calendar for the United States and the United Kingdom:

On February 22, the calendars of economic events in the United Kingdom and the United States are empty. Thus, the information background will be absent today.

COT (Commitments of Traders) report:

The latest COT report from February 16 on the British pound was extremely boring, as was the report on the euro. During the reporting week, the "Non-commercial" category of traders opened 369 long contracts and closed 3,308 short contracts. Thus, the mood of speculators has become more "bullish", which further increases the chances of the British dollar continuing to grow. In general, during the reporting week, almost an equal number of long and short contracts were opened by all players. Nevertheless, despite the small changes, the pound continues a strong and long process of growth.

Forecast for GBP/USD and recommendations for traders:

It was recommended to buy the British dollar in case of closing above the level of 1.3979 on the 4-hour chart with a target of 1.4126. I recommend keeping these deals open for now. I recommend selling the pound sterling when the quotes are fixed under the upward trend corridor on the hourly chart with the targets of 1.3820 and 1.3744.

Terms:

"Non-commercial" - major market players: banks, hedge funds, investment funds, private, large investors.

"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy foreign currency, not for speculative profit, but to support current activities or export-import operations.

"Non-reportable positions" - small traders who do not have a significant impact on the price.