GBP/USD - 24H.
The GBP/USD currency pair was also in an upward movement for most of the past week. However, on Friday, it crossed out all the efforts of the bulls. The pair's quotes fell by 120 points. For the euro currency, this fall can be explained by profit-taking on long positions. However, this explanation looks very doubtful for the pound since there was no strong growth before this fall.
On the contrary, the pair continues to move in a "swing" mode, and we have been warning all last week that the pound could resume its downward movement, as it was necessary to work out a new round of downward movement by 250-300 points down. Thus, it turns out that the pound should have fallen due to the "swing" and the European currency – due to the need to adjust after a strong trend. These two factors coincided, and on Friday (the last trading day of the week and month), there was a collapse. It was very difficult to predict; however, everything looks very logical. The pound does not currently have a clear direction and trend, and it may continue to move down next week. We believe that the pair is quite capable of falling by another 100-150 points, that is, to the previous local minimum. It may be followed by a new round of upward movement within the same "swing." So far, we do not see what has changed in the market or the fundamental background for the pair itself to start moving in any other way. Traders have long ignored the fundamental background. Otherwise, the British currency would have to be caught around the 30th level. Macroeconomic statistics are also often ignored. Two global factors remain. The factor of pouring trillions of dollars into the American economy and the "speculative factor." The first can help the pair continue to grow in 2021, and the second - does not allow the quotes to fall much at this time.
COT report.
During the last reporting week (April 20-26), the GBP/USD pair fell by 90 points. The last few COT reports have shown that the mood among professional players is again becoming more "bullish," but in general, they do not know what to do with the pound in the last year. Look at the first indicator in the illustration below the chart. The green line is the net position of a group of "Non-commercial" traders. It constantly changes the direction of movement and intersects with the red line (the "Commercial" group). In general, it is not possible to predict the further movement of the pair based on COT reports at the moment. From October to March, the pound rose in price against the dollar, although the green and red lines at this time showed no trend. In the reporting week, major players closed 1.1 thousand contracts for buying and got rid of 5 thousand contracts for selling. Thus, their net position increased by 3.9 thousand contracts, and the mood again became more "bullish." In general, it also remains "bullish," as the total number of contracts to buy from professional players exceeds the total number of contracts to sell by two times. Thus, of course, we can expect further growth in the British pound, but we still believe that the "swing" will continue at this time. There are too many conflicting factors at the disposal of the markets. The constant changes in the direction of the green line suggest that the big players themselves do not know what to do with the pound in the long run.
During the current week, no macroeconomic report was published in the UK. All the attention of traders is now focused on the upcoming elections to the Scottish Parliament, scheduled for May 6, on the riots in Northern Ireland, which London has so far refused to solve, on the scandal with Boris Johnson and his phrase about "mountains of corpses," as well as on the renovation of the Prime Minister's apartment. All these news and topics are unlikely to have impacted the movement of the pair, which remains in the "swing" mode. American statistics and the "foundation" also did not have a special impact on the pair's movement. To begin with, nothing extraordinary is happening in the United States right now. Yes, the media and investors are actively discussing possible tax increases for rich Americans, for large corporations, a single corporate tax for all countries of the world, and another package or even two packages of incentives for the US economy, which Joe Biden initiates. But so far, these are not specific bills, but only proposals. And what impact can they have on the dollar? If trillions of dollars are allocated, then we should expect a new fall in the US currency.
Trading plan for the week of May 3-7:
1) The pound/dollar pair has made a couple of attempts to resume the upward movement, but so far, it is moving more in the "swing" mode without a clear trend. Thus, there is simply no upward trend right now. Even fixing the price above the Ichimoku cloud or the critical line does not give any advantage to the buyers of the pound. Thus, so far, the prospects for the pound can be called "uncertain."
2) Sellers still do not have the strength to start forming a downward trend. Formally, since the pair is fixed below the Senkou Span B and Kijun-sen lines, the downward movement may continue, but we do not expect a downward movement of more than 100-150 points. We recommend trading the pair at this time, using lower timeframes, where trends still have time to form and work out at least a little.
Explanation of illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced before.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.