Analysis of GBP/USD 5M
GBP/USD experienced a minor downward retracement, but this did not affect the overall technical picture. The price settled below the critical Kijun-sen line, but the upward trend persists as the pair remains close to its local high. We're still waiting for the end of the upward movement, as we believe that it has been extended since it is part of a corrective phase. The pound has once again thoroughly exhausted all factors for its potential growth and is now reluctantly attempting to resume the downward trend. Since the pair has left the ascending channel, we anticipate a decline. Given that the fundamental background remains in favor of the dollar, we expect a decline. The nearest target is the Senkou Span B line.
On Tuesday, there were no important reports or events. We've previously mentioned that several Federal Reserve officials have delivered speeches that turned out to be much more hawkish than the market expected or could have expected. Now, Michelle Bowman is discussing the possibility of a Fed rate hike, and her colleagues believe that the restrictive policy will remain in place for a long time. Inflation in the US has hardly decreased for almost a year now, so it doesn't make sense to talk about easing monetary policy at the moment. At the same time, the Bank of England may suggest a rate cut.
On the 5-minute timeframe, three trading signals were formed around the critical Kijun-sen line. Given the "whopping" 44-pip volatility, it's not surprising that all three turned out to be false signals. We will remind you that when there are no movements, the pair will generate false signals or traders simply won't gain any profit.
COT report:
COT reports on the British pound show that the sentiment of commercial traders often changes in recent years. The red and blue lines, which represent the net positions of commercial and non-commercial traders, constantly intersect and, in most cases, remain close to the zero mark. According to the latest report on the British pound, the non-commercial group closed 4,800 buy contracts and 2,000 short ones. As a result, the net position of non-commercial traders decreased by another 2,800 contracts in a week. Sellers continue to hold their ground. The fundamental background still does not provide a basis for long-term purchases of the pound sterling, and the currency finally has a real chance to resume the global downward trend. The trend line on the 24-hour TF clearly shows this. Almost all of the factors point to the pound's decline.
The non-commercial group currently has a total of 43,700 buy contracts and 72,700 sell contracts. Now the bears are in control and the pound has a huge potential to fall. We can only hope that inflation in the UK does not accelerate, or that the Bank of England will not intervene.
Analysis of GBP/USD 1H
On the 1H chart, GBP/USD continues to go through a bullish correction, which could turn into anything. Since the price could not overcome the area of 1.2605-1.2620, there are hopes of bringing back the downward trend in the medium-term. However, the results of the Bank of England meeting will be announced tomorrow, which could be absolutely anything. And the market could show a strong reaction. We have long been accustomed to the market interpreting any controversial data in favor of the pound.
As of May 8, we highlight the following important levels: 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2516, 1.2605-1.2620, 1.2691-1.2701, 1.2786, 1.2863, 1.2981-1.2987. The Senkou Span B line (1.2433) and the Kijun-sen line (1.2550) lines can also serve as sources of signals. Don't forget to set a Stop Loss to breakeven if the price has moved in the intended direction by 20 pips. The Ichimoku indicator lines may move during the day, so this should be taken into account when determining trading signals.
On Wednesday, there are no important events scheduled in the UK and the US. Traders will have nothing to react to, and the pair's volatility may be very weak once again. It's unlikely that the market will find grounds to end the correction, but the results of the BoE meeting will be announced on Thursday, so the market may start anticipating them in advance. Overcoming the level of 1.2516 could pave the way to the Senkou Span B line.
Description of the chart:
Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;
Yellow lines are trend lines, trend channels, and any other technical patterns;
Indicator 1 on the COT charts is the net position size for each category of traders;
