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In my morning forecast, I paid attention to the level of 1.3022 and recommended making decisions on entering the market. Let's look at the 5-minute chart and figure out where and how you could earn. The expected jump in inflation in the UK led to a jerk of the pair up, as it was yesterday after the publication of the consumer price index in the US, and then to the sale of the pound. A false breakout at 1.3022 gave an excellent entry point into short positions. As a result, the downward movement amounted to more than 50 points. The breakthrough of 1.2988 occurred without a reverse test from the bottom up, so I did not add to the sales. At the time of writing, the pound has already been bought off and the pair has returned to the side channel in which it was in the morning. For this reason, I decided not to revise the technical picture for the afternoon. And what were the entry points for the euro this morning?
To open long positions on GBP/USD, you need:
The sharp inflation jump in the UK to 7.0% per annum in March of this year was not something surprising, although economists had expected a less serious increase in the indicator. All this led to the sale of the pound for the reason that the main problem in the UK is precisely the record growth of inflation, which eats up a significant part of the income of citizens. At the same time, the Bank of England is not going to interfere in the situation, which will only worsen the situation further. In case of another fall of the pound in the afternoon, only a false breakout at 1.2988 will lead to the formation of the first buy signal that can return GBP/USD to the area of the new middle of the 1.3022 side channel. There are moving averages that play on the sellers' side. If this scenario is implemented, the breakdown and the 1.3022 test from top to bottom will form an additional entry point for opening long positions, which will strengthen the bulls and open the way to grow in the 1.3052 area. However, the upward movement from this level will depend on data on producer prices in the United States. Slower growth of the index, which is unlikely, will lead GBP/USD to the area of the more distant target of 1.3079, where I recommend fixing the profits. Under the scenario of the GBP/USD falling during the US session and the lack of activity at 1.2988, it is best to postpone purchases to a new low of 1.2950. I advise you to enter the market there only if there is a false breakdown. You can buy GBP/USD immediately for a rebound from 1.2911, or even lower - in the area of 1.2856 and only with the aim of correction of 30-35 points within a day.
To open short positions on GBP/USD, you need:
As we can see, the data on the UK economy did not help the pound much. The next update of local lows indicates the continuation of the downward trend. However, it is worth noting that it was not possible to gain a foothold at lows below 1.2988 in the first half of the day, which may lead to an upward correction of the pair. The primary task now is to protect the 1.3022 level, which they coped with perfectly during the European session. Moving averages are slightly higher, playing on the sellers' side, so only the formation of a false breakdown together with strong US inflation will give an entry point into short positions to strengthen the bear market and re-reduce the pair to the area of 1.2988. A breakdown and a reverse test of 1.2988 will lead to the demolition of several buyers' stop orders and a sell signal, which will dump GBP/USD to the lows: 1.2950 and 1.2911. A more distant target will be the 1.2856 area, where I recommend fixing the profits. If the pair grows during the American session and sellers are weak at 1.3022, this will not create any special problems for them. This is just the middle of the side channel - the medium-term trend remains downward. However, in this scenario, it is best to postpone sales until 1.3052. 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 the maximum of 1.3079, or even higher - from 1.3104, counting on the pair's rebound down by 30-35 points within a day.
The COT report (Commitment of Traders) for April 5 recorded an increase in both short and long positions. However, there were more of the first ones, which once again led to an increase in the negative delta. Concerns related to the state of the UK economy and the risks of high inflation, which is sure to further exacerbate the ongoing crisis of British households, have been confirmed. Recent GDP data indicated a very sharp slowdown in economic growth. Experts note that the situation will only worsen, as inflation risks are now quite difficult to assess, but it is clear for sure that 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 only push prices up. The only thing the bulls can count on now is the positive results of the negotiations between the representatives of Russia and Ukraine and progress towards a settlement of the conflict. Do not forget about 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 in the direction of selling the pound against the US dollar. The COT report for April 5 indicated that long non-profit positions rose from the level of 30,624 to the level of 35,873, while short non-profit positions jumped from the level of 70,694 to the level of 77,631. This led to an increase in the negative value of the non-commercial net position from -40 070 to -41 758. The weekly closing price rose to 1.3112 against 1.3099.
Signals of indicators:
Moving averages
Trading is below 30 and 50 daily moving averages, which indicates a further fall in 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 case of a decline, the lower limit of the indicator around 1.2988 will act as support.
Description of indicators
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