In my morning forecast, I highlighted 1.2590 as a key level for making trading decisions. Looking at the 5-minute chart, we can see that a break and retest of 1.2590 provided an entry point for long positions, leading to a 30+ point increase in GBP/USD. The technical outlook remains unchanged for the second half of the day.

Long Position Strategy for GBP/USD

Buyers have returned to the market after sellers failed to defend 1.2590, indicating uncertainty about further direction. UK economic data had little impact on the pair, but upcoming U.S. jobless claims and the Philadelphia Fed Manufacturing Index could influence price action. Additionally, speeches from FOMC members Austan D. Goolsbee and Michael S. Barr may drive market sentiment.

If GBP/USD declines, I will look for long entries at 1.2590, which previously acted as resistance. A false breakout at this level would confirm a buying opportunity, targeting 1.2631, the weekly high. A break and retest of 1.2631 would validate further upward potential, opening the way to 1.2664. The final bullish target is 1.2692, where I will secure profits.

If GBP/USD falls below 1.2590 and buyers show no activity, the bearish pressure will increase. In this scenario, I will consider long positions only after a false breakout near 1.2550. If further declines occur, I will buy GBP/USD from 1.2515, targeting an intraday correction of 30-35 points.

Short Position Strategy for GBP/USD

Sellers have largely withdrawn from the market, failing to hold resistance. This allowed buyers to push towards the weekly high, which they now need to defend. A false breakout at 1.2631 would confirm a short trade opportunity, targeting 1.2590, where moving averages support the bullish trend.

A break and retest of 1.2590 from below would confirm a shift towards sellers, opening the way to 1.2550. The final bearish target is 1.2515, where I will take profits.

Commitment of Traders (COT) Report

The COT report from February 11 showed a reduction in both long and short positions, but demand for the pound increased sharply. However, it's important to note that this report does not account for the Putin-Trump phone call, which could have shifted sentiment in favor of risk assets.

Currently, U.S. dollar weakness continues to dominate, particularly given the lackluster U.S. economic data. The report indicates that long non-commercial positions increased by 3,645 contracts, reaching 69,087, while short non-commercial positions decreased by 4,510 contracts to 72,255. This resulted in a net gap increase of 4,914 contracts in favor of pound buyers.

Indicator Signals

Moving Averages

GBP/USD is trading above the 30 and 50-day moving averages, signaling a bullish trend.

Bollinger Bands

If GBP/USD declines, the lower boundary at 1.2565 will act as support.

Indicator Descriptions:

• Moving Average (MA): Identifies trend direction by smoothing market volatility.
  • 50-period MA (yellow line).
  • 30-period MA (green line).
• MACD (Moving Average Convergence/Divergence):
  • Fast EMA – 12-period
  • Slow EMA – 26-period
  • Signal line (SMA) – 9-period
• Bollinger Bands: Measures price volatility (20-period setting).
• Non-commercial traders: Speculators such as hedge funds and institutions using the futures market for speculation.
• Long non-commercial positions: The total number of buy contracts held by non-commercial traders.
• Short non-commercial positions: The total number of sell contracts held by non-commercial traders.
• Net non-commercial position: The difference between long and short positions among non-commercial traders.