Trading Recommendations and Analysis of GBP/USD for February 24. The Pound Sterling Was Not Enough for Long

[Ben Graham]

Analysis of GBP/USD 5M

The GBP/USD currency pair merely corrected to the critical Kijun-sen line on Monday, failing to overcome it and subsequently bouncing back. Thus, the overall decline in the dollar culminated in a microscopic correction on the hourly timeframe. Recall that on Friday, Donald Trump imposed new trade tariffs to replace those the U.S. Supreme Court had annulled, and on Saturday, he raised them to 15%. However, the market did not consider this information negative for the dollar, just as it deemed it unnecessary to sell the dollar following the disappointing GDP report on Friday. Therefore, we view the current downward trend as completely illogical. The British pound had reasons for its decline over the past two weeks, but the dollar also had its own reasons.

From a technical standpoint, the downward trend persists, as indicated by the trend line and the price's position relative to the Ichimoku indicator lines. Therefore, at this moment, there are no grounds to expect a rise in the British currency. There are also no reasons to expect growth in the U.S. dollar, yet the market ignores inconvenient news, so the U.S. dollar may well continue to rise.

On the 5-minute timeframe, one very good trading signal was generated over the previous day. At the very beginning of the European trading session, the price bounced off the 1.3533-1.3548 range, triggering a notable decline. This signal was not canceled, but the price could not reach the nearest target level of 1.3437. Thus, the trade could have been closed manually in the evening or carried over to Tuesday, setting a Stop Loss at breakeven. In the first case, the profit amounted to approximately 25-30 pips.

COT Report

COT reports for the British pound show that commercial traders' sentiment has been changing steadily in recent years. The red and blue lines reflecting the net positions of commercial and non-commercial traders frequently cross each other and are mostly found near the zero mark. Currently, the lines are approaching each other, with non-commercial traders still dominating with sales. Recently, speculators have been actively increasing long positions, so a change in sentiment may occur soon, which does not particularly affect the GBP/USD pair.

The dollar continues to decline due to Trump's policy, as clearly seen on the weekly timeframe (illustration above). The trade war will continue in one form or another for a long time, and the Federal Reserve will, in any case, lower the rate in the next 12 months. Demand for the dollar will inevitably decline. According to the latest COT report (as of February 17) for the British pound, the "Non-commercial" group closed 6,400 BUY contracts and opened 10,200 SELL contracts. Thus, the net position of non-commercial traders decreased by 16,600 contracts over the week.

In 2025, the pound rose significantly, but it should be noted that there is one reason for this: Trump's policy. Once this reason is neutralized, the dollar may transition to growth. But when this will occur is unknown to anyone.

Analysis of GBP/USD 1H

On the hourly timeframe, the GBP/USD pair continues to form a downward trend. Individual events continuously hindered the rise of the British currency or supported the dollar recently. The market simply ignores some data. We still believe that, in the medium term, the British pound will strengthen amid the American currency's decline. However, at this time, the trend is downward, so buying should wait until its completion.

For February 24, we highlight the following important levels: 1.3201-1.3212, 1.3307, 1.3369-1.3377, 1.3437, 1.3533-1.3548, 1.3615, 1.3671-1.3681, 1.3751-1.3763, 1.3846-1.3886, 1.3948. The Senkou Span B line (1.3602) and Kijun-sen (1.3521) may also serve as sources of signals. It is recommended to set the Stop Loss to breakeven when the price moves in the correct direction by 20 pips. The lines of the Ichimoku indicator may shift during the day, which should be considered when determining trading signals.

On Tuesday, there are no major events or reports scheduled in the UK. The U.S. will publish the weekly ADP report, which we do not consider important. Thus, volatility today is unlikely to be high, and the downward trend is unlikely to be broken.

Trading Recommendations:

Today, traders may remain in short positions with a target at 1.3437, as the price has bounced from the 1.3533-1.3548 area. Long positions will become relevant with a target of 1.3602-1.3615 if the price overcomes the area of 1.3533-1.3548.

Explanations for Illustrations:

Support and resistance levels are thick red lines, around which the movement may end. They are not sources of trading signals.

The Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour timeframe. They are strong lines.

Extremum levels are thin red lines, from which the price previously bounced. They are sources of trading signals.

Yellow lines are trend lines, trend channels, and any other technical patterns.

Indicator 1 on the COT charts shows the size of the net position of each category of traders.

The material has been provided by InstaForex Company - www.instaforex.com