In my morning forecast, I paid attention to the level of 1.2503 and recommended that decisions on entering the market be made from it. Let's look at the 5-minute chart and figure out what happened. A successful attempt by the bulls to break above 1.2503 ended with a reverse test from top to bottom of this level, which led to a signal to buy the pound with a slight upward movement of 10 points. However, it has not yet reached a major upward movement. Until the moment when trading is conducted above 1.2503, we can expect a recovery to the area of 1.2560. No other entry points were formed against the background of low volatility. And what were the entry points for the euro this morning?
To open long positions on GBP/USD, you need:
The expected decision of the Federal Reserve System on interest rates, namely their increase by 0.5%, is already a done deal. Another point is how the committee will continue to act and whether it will continue to tighten policy at the same pace to further combat high inflation. If yes, I recommend continuing to sell the pound according to the trend. If we hear changes in Jerome Powell's rhetoric, the pound may regain its strength in the expectation of building a larger upward correction. To do this, you will need support protection 1.2503. In the event of another decline to it in the afternoon after strong data on the index of business activity in the services sector, the composite PMI index, and the balance of foreign trade in the United States, only the formation of a false breakdown there will give a signal to open long positions against the trend, counting on the continuation of the upward correction and a return to 1.2560. It is possible to expect a sharper upward jerk, but only after the demolition of the bears' stop orders above 1.2560, which may happen after weak data on changes in the number of employed from ADP. A test of this level from top to bottom will give a buy signal already with the aim of correction to the area of 1.2610. A similar consolidation above this level will lead to the highs: 1.2684 and 1.2728, where I recommend fixing profits. In the case of a decline in the pound and the absence of buyers at 1.2503, even before the publication of the Fed's decision on interest rates, it is best to postpone purchases until the next support of 1.2440. I also advise you to enter the market there only if there is a false breakdown. It is possible to buy GBP/USD immediately for a rebound from the minimum of 1.2381 and only for a correction of 30-35 points within a day.
To open short positions on GBP/USD, you need:
The bears retreated, but they did not stop controlling the market. In the case of GBP/USD growth during the US session after weak US data, sellers should do everything to keep the pair above 1.2560. The formation of a false breakdown at this level will be an excellent sell signal - especially before the Federal Reserve meeting, after which the pressure on the pound may return. You can also count on the breakdown of the 1.2503 level, which the bears missed in the first half of the day, but only after strong statistics on the United States. 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 the lows, in the area of 1.2440, where I recommend fixing the profits. The 1.2381 area will be a more distant target, but it will be quite difficult to hope for the implementation of this scenario before the publication of the meeting results. With the option of further growth of GBP/USD and lack of activity at 1.2560, a new upward jerk may occur against the background of the demolition of stop orders. In this case, I advise you to postpone short positions to a larger resistance of 1.2610, from where the bears recently staged a good sale. I also advise you to open short positions there only in case of a false breakdown. You can sell GBP/USD immediately for a rebound from 1.2684, counting on the pair's rebound down by 30-35 points within a day.
The COT report (Commitment of Traders) for April 19 recorded an increase in both short and long positions, but the former turned out to be much larger, which is obvious if you look at the GBP/USD chart. Things are very bad in the UK economy, which was confirmed last week by the Governor of the Bank of England, Andrew Bailey. His statements that the economy is heading towards recession were the last straw holding back the sellers of the pound in the second half of April. As a result, the breakdown of the finished minimum and a new major sale of the pound have already driven the trading instrument below the 26th figure, and it seems that this is not the end. The growth of the consumer price index is steadily moving towards double-digit indicators, and the increasingly complicated situation in the world due to supply chain disruptions against the background of a new wave of COVID-19 in China creates even more problems. 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. The situation in the UK labor market, where employers are forced to fight for every employee by offering higher and higher wages, is also pushing inflation higher and higher. The pressure on the pound is also growing for another reason - the aggressive policy of the Federal Reserve System. Already during the May meeting, the committee may announce an increase in interest rates by 0.75% at once - they do not have such problems with the economy as in the UK yet. The COT report for April 19 indicated that long non-commercial positions rose from the level of 35,514 to the level of 36,811, while short non-commercial positions jumped from the level of 88,568 to the level of 95,727. This led to an increase in the negative value of the non-commercial net position from -53 054 to -58 268. The weekly closing price decreased from 1.3022 to 1.2997.
- 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.
