The British pound collapsed at lightning speed after the terrible statistics on retail sales in the UK, which indicates a real problem with high inflation in the country. In my morning forecast, I paid attention to several levels, but I think few people could expect such a large sale. The sharp fall of the pound was restrained only in the area of 1.2911. The formation of a false breakdown at this level led to a buy signal in the calculation of not a small rebound of the pound up - this happened. Then there was a breakthrough and a return under 1.2911, and a test of this area from the bottom up gave a signal to open new short positions with the prospect of a decline to the area of 1.2856. At the time of writing, the 1.2856 test was 10 points short. And what were the entry points for the euro this morning?
To open long positions on GBP/USD, you need:
Weak retail sales data, together with a slowdown in activity in the manufacturing sector and the UK services sector, as well as yesterday's statements by the governor of the Bank of England, Andrew Bailey, that there is not so much time left before the recession of the economy - all this collapsed the pound today in the morning, canceling all the plans and hopes of buyers for further recovery couples. It is certainly possible to count on the fact that buyers will be able to take advantage of American statistics today and try to at least partially compensate for losses, but this scenario is unlikely to be prudent. Similar data are published for the USA today, as well as for the UK: the index of business activity in the manufacturing sector, the index of business activity in the services sector, and the composite PMI index. Weak indicators will help the bulls to protect the nearest support of 1.2856, but only the formation of a false breakdown on it will give a signal to open long positions against the trend, counting on an upward correction to the area of 1.2906. It is hardly possible to expect a sharper upward jerk, but anything happens. Therefore, a break and consolidation above 1.2906 with a reverse test from top to bottom will give a buy signal with the aim of growth to 1.2943, where I recommend fixing the profits. In the case of a decline in the pound and the absence of buyers at 1.2856, and this may very well be, it is best to postpone purchases until the next support of 1.2807. I advise you to enter the market there only if there is a false breakdown. You can buy GBP/USD immediately on a rebound from the minimum of 1.2749, or even lower - in the area of 1.2700 and only to correct 30-35 points within a day.
To open short positions on GBP/USD, you need:
Bears control the market and it is better to sell on growth. Sellers will focus on US statistics today, which will help return GBP/USD to the level of 1.2856, but the primary task will be to protect the new resistance of 1.2906. The formation of a false breakdown at this level will be an excellent sell signal. When implementing this scenario, you can also count on the breakdown of 1.2856. 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 collapse the pound to 1.2807. A more distant target will be the 1.2749 area, I recommend fixing the profits. In the scenario of GBP/USD growth and lack of activity at 1.2906, I advise you to postpone short positions to a larger resistance of 1.2943. 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 1.2971, 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 below 30 and 50 daily moving averages, which indicates the resumption of the bear market for the pound.
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 growth, the average border of the indicator around 1.3007 will act as resistance.
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.
