In my morning forecast, I highlighted the 1.2648 level as a key area for market entry decisions. Let's analyze the 5-minute chart to see what happened. The rise and false breakout around the 1.2648 support level provided a good short entry opportunity, but the downward movement was limited. The technical outlook for the second half of the day remains unchanged.

Opening Long Positions on GBP/USD:

The lack of UK economic data and Bank of England (BoE) comments had little effect on the pound's price action, keeping the pair within a narrow sideways range.

In the second half of the day, only strong U.S. new home sales data could pressure the pound, as FOMC members Thomas Barkin and Raphael Bostic are unlikely to provide hawkish surprises given their dovish stance on interest rates.

If bears attempt another market decline, I plan to open long positions only after a false breakout at 1.2607. The target will be 1.2648, where the pair is currently trading. A break and retest of this range from above would confirm a strong buy signal, pushing GBP/USD toward 1.2687, a weekly high.

The final target will be 1.2726, where I will lock in profits.

If GBP/USD declines and lacks bullish activity at 1.2607, bearish pressure will increase significantly. In this case, I will consider long entries only after a false breakout at 1.2563. If no buyers appear there, I will wait for a bounce from 1.2515, aiming for a 30-35 point intraday correction.

Opening Short Positions on GBP/USD:

Sellers attempted to act but lacked the necessary momentum. Now, their hopes rest on strong U.S. data and hawkish Fed comments.

The primary target for bears is to defend the 1.2687 resistance level. A false breakout at this level would confirm a short entry, targeting a drop toward 1.2648, where the pair is currently trading, with moving averages favoring buyers.

A break and retest below 1.2648 would trigger stop-loss orders, allowing further downside toward 1.2607. The final bearish target is 1.2563, where I will take profits.

If GBP/USD rises in the U.S. session, and sellers fail to act at 1.2687, the pair could continue its uptrend. In this case, I will delay shorts until a test of 1.2726, where I will sell only after an unsuccessful breakout. If the pair fails to reverse there, I will consider shorts at 1.2745, aiming for a 30-35 point downward correction.

Commitment of Traders (COT) Report:

The COT report for February 18 showed an increase in both long and short positions, with longs growing at a higher rate. This indicates buying interest in the pound, but market equilibrium remains intact.

Rising UK inflation and retail sales data suggest that BoE rate cuts will be cautious, potentially supporting further pound appreciation. Non-commercial long positions increased by 4,477 to 73,477. Non-commercial short positions rose by 1,888 to 74,143. The gap between long and short positions narrowed by 3,870.

Indicator Signals

Moving Averages

GBP/USD is trading around the 30 and 50-day moving averages, signaling market uncertainty and a lack of clear directional momentum.

Note: The author's moving average settings are based on the H1 chart, which differs from classic daily moving averages (D1).

Bollinger Bands:

If GBP/USD declines, the lower Bollinger Band at 1.2635 will act as support.

Indicator Descriptions:

• Moving Average (MA): Identifies the current trend by smoothing price volatility (50-period in yellow, 30-period in green).
• MACD Indicator: Measures moving average convergence/divergence (Fast EMA – 12, Slow EMA – 26, Signal SMA – 9).
• Bollinger Bands: Measures volatility and identifies support/resistance levels (20-period).
• Non-commercial traders: Speculative players (retail traders, hedge funds, and institutions) using futures markets for speculation.
• Non-commercial long positions: The total long open interest held by speculative traders.
• Non-commercial short positions: The total short open interest held by speculative traders.
• Net non-commercial position: The difference between long and short speculative positions.