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In my morning forecast, I paid attention to the level of 1.3019 and recommended making decisions on entering the market. A breakthrough with a reverse test of this range did not have to wait for a long time. As a result, a signal was formed to sell the pound in continuation of the bear market observed recently. Unfortunately, there was no major sale. At the time of writing, I had to fix the losses, as well as completely revise the technical picture. The low volatility of about 25 points in the first half of the day due to Easter Monday did not allow the sellers of the pound to continue their business of pushing GBP/USD to monthly lows. And what were the entry points for the euro this morning?
To open long positions on GBP/USD, you need:
The lack of statistics for the UK did not support the bear market, although if you look at it this way, the pair has gone down by more than 50 points since the opening of today. In such a market, this is a great reason for profit-taking. In the afternoon, US data was released. It is necessary to pay attention to the NAHB housing market index, as well as to the speech of FOMC member James Bullard, who once again burst out with his hawkish statements on the need to raise interest rates and revise the monetary policy rate during the May meeting - this is another reason to build up long positions on the US dollar. The primary task of the bulls now is to protect the new support of 1.3006, formed by the results of today. In case of a decrease to it, I do not recommend counting on instant purchases from this level. Only after a false breakdown can we hope for the pair to move up again to the area of 1.3028 and to go beyond this range. To change the picture of what is happening, bulls 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 1.3028. A breakdown and a test of this range from top to bottom form an additional entry point for opening long positions, which will strengthen the bulls and open the way to the 1.3051 area, where the moving averages are playing on the sellers' side. A more distant target will be a maximum of 1.3072, where I recommend fixing the profits. In the event of a decline in the pound and the absence of buyers at 1.3006, the panic may intensify. In this case, it is best to postpone purchases until the next support of 1.2991. 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 this month's minimum of 1.2974, or even lower - in the area of 1.2950 and only to correct 30-35 points within a day.
To open short positions on GBP/USD, you need:
The bears have done everything in their power today, but it is quite difficult to keep the initiative in such a thin market where there is no volume due to the weekend. The bears may be waiting for statistics on the United States, which will again help push the pair down. But the primary task of sellers now is to protect the resistance of 1.3028, formed at the end of the first half of the day. The formation of a false breakdown at this level will be an excellent sell signal. You can also count on the breakdown of 1.3006. A breakout and a reverse test from the bottom up of this range will lead to the formation of a sell signal that can return the pound to the lows: 1.2991 and 1.2974, where I recommend fixing the profits. In the scenario of GBP/USD growth and lack of activity around 1.3028, I advise you to postpone short positions to a larger resistance of 1.3051. 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 1.3072, 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 towards 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 an attempt by the bears to continue the fall of 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 upper limit of the indicator around 1.3075 will act as resistance.
Description of indicators
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