In my morning forecast, I paid attention to the level of 1.3072 and recommended making decisions on entering the market. Let's look at the 5-minute chart and figure out what happened. A false breakout at 1.3072 at the beginning of the European session led to a sell signal for the pound. As a result, the downward movement was about 25 points, but we did not reach the nearest support of 1.3044. Closer to the middle of the day, the bulls again tried to gain a foothold above 1.3072 and again failed, which indicates that no people are willing to buy the pound at current highs. The return under 1.3072 led to a revision of the technical picture for the second half of the day, but it did not change much. The strategy remained the same. And what were the entry points for the euro this morning?
To open long positions on GBP/USD, you need:
Everyone is waiting and wondering what the governor of the Bank of England, Andrew Bailey, who has not been very fond of speaking in public lately, will talk about. Even hawkish comments are unlikely to help the pound, so I do not advise counting on further growth of the pair. The rhetoric of Federal Reserve Chairman Jerome Paul will be much more important for determining the direction of the pair in the short term - most likely this direction will be towards the south. Strong fundamental data on the number of initial applications for unemployment benefits, the Fed-Philadelphia manufacturing index, and the index of leading indicators in the US will certainly increase pressure on the pound, which will push it to the nearest support of 1.3049. Only after a false breakdown can we hope for the pair to move up again to the area of 1.3088 and to go beyond this range. To change the picture of what is happening, buyers need to rely on something. Given that there is still little positive in the market, it will not be easy to get above the resistance of 1.3088. All hope is in Bailey and his aggressive policy on interest rates. Only the breakdown and the 1.3088 test from top to bottom form an additional entry point for opening long positions, which will strengthen the bulls and open the way to the 1.3122 area. A more distant target will be a maximum of 1.3143, where I recommend fixing the profits. If the pound declines and there are no buyers at 1.3049, which is more likely, the pressure on the pair will return very quickly. In this case, it is best to postpone purchases until the morning support of 1.3023. I advise you to enter the market there only with a false breakdown by analogy with what I discussed above. You can buy GBP/USD immediately on a rebound from the minimum of 1.2996, or even lower - in the area of 1.2974 and only with the aim of correction of 30-35 points within the day.
To open short positions on GBP/USD, you need:
The bears have played off all European growth attempts but still allowed the weekly highs to be updated, which keeps the market on the buyers' side for now. Sellers will focus on US statistics today, which will help return GBP/USD to the level of 1.3049, but the primary task is to protect the new resistance of 1.3088. The formation of a false breakdown at this level will be an excellent sell signal. When implementing this scenario, you can also count on a breakdown of 1.3049. A breakout and a reverse test from the bottom up of this range will lead to the formation of an additional sell signal that can return the pound to 1.3023, where the moving averages pass, and then to the area of 1.2996, I recommend fixing the profits. In the scenario of GBP/USD growth and lack of activity at 1.3088, I advise you to postpone short positions to a larger resistance of 1.3122. I also advise you to open short positions there only in case of a false breakdown. It is possible to sell GBP/USD immediately for a rebound from the maximum of 1.3143, counting on the pair's rebound down by 30-35 points within a day.
The COT report (Commitment of Traders) for April 12 recorded an increase in short positions and a reduction in long ones. All this once again confirmed the attitude of traders to the British economy, which is teetering on the brink of recession mixed with the highest inflation for a long period. The sharp rise in the consumer price index in March this year to another maximum of 7.0% once again proved the complexity of the situation in which the Bank of England found itself, but the report on UK GDP, on the contrary, did not please traders much. The situation will only worsen, as future inflation risks are now quite difficult to assess due to the difficult geopolitical situation, but the consumer price index will continue to grow in the coming months. At the same time, the soft position of the governor of the Bank of England will push prices up. The pressure on the pound is also increasing due to the aggressive policy of the Federal Reserve System, which is becoming more hawkish every day. In the US, there are no such problems with the economy as in the UK, so there the Fed can raise rates more actively, which it is going to do during the May meeting - another signal towards selling the pound against the US dollar. The COT report for April 12 indicated that long non-profit positions decreased from the level of 35,873 to the level of 35,514, while short non-profit positions jumped from the level of 77,631 to the level of 88,568. This led to an increase in the negative value of the non-commercial net position from -41,758 to -53,054. The weekly closing price decreased from 1.3112 to 1.3022.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 daily moving averages, which indicates an attempt by the bulls to continue the correction.
Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger Bands
In the case of a decline in the pair, the lower limit of the indicator around 1.3040 will act as support.
Description of indicators
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit speculative traders, such as individual traders, hedge funds, and large institutions use the futures market for speculative purposes and to meet certain requirements.
- Long non-commercial positions represent the total long open position of non-commercial traders.
- Short non-commercial positions represent the total short open position of non-commercial traders.
- Total non-commercial net position is the difference between the short and long positions of non-commercial traders.
