Hi, dear traders!
According to the H1 chart, GBP/USD largely moved sideways early on Tuesday. However, the pair settled below the retracement level of 200.0% (1.3071) earlier, indicating it could likely fall down in the future. Bullish traders failed to take the initiative when the pair bounced off 1.2980 upwards. GBP/USD is likely to settle below 1.2980 and descend towards the Fibo level of 261.8% (1.2895). Yesterday's data releases in the UK turned out to be disappointing for market players. The UK's economic growth in February was slower than expected, while manufacturing production decreased by 0.6% month-over-month. Today's UK labor market data was significantly more positive, with unemployment falling to 3.8%, claimant count dropping by 47,000, and the average earnings index rising by 5.4%, matching expectations. However, the pound sterling failed to find any support in these data releases.
Today, US CPI data will be published - inflation in the US could increase further once again. Unconfirmed reports in Ukrainian media claimed Russian forces in Mariupol allegedly used chemical weapons against Ukrainian troops yesterday - if these reports are confirmed, Western nations will likely announce new measures against Russia today. Overall, relations between Russia and the West will probably sink no matter what, which does not seem to concern Moscow very much. In other news, the president of Fed Reserve Bank of Minneapolis Lael Brainard is set to speak today. Her last week's statements were notably hawkish. The more FOMC board members speak about hiking interest rates and reducing the Fed's balance sheet, the more likely USD is to increase further.
According to the H4 chart, GBP/USD settled below the retracement level of 76.4% (1.3044). It could then fall towards 1.2860. The descending trend line indicates that the sentiment of traders is bearish - if GBP/USD closes above the trend line, the trader sentiment could become bullish for a short time, which could push the pair up towards the Fibo level of 61.8% (1.3274). There are no emerging divergences today.
Commitments of Traders (COT) report:
The sentiment of Non-commercial traders did not change significantly during the last week covered by the report. Traders opened 5,249 Long positions and 6,937 Short positions, indicating an increasingly bearish trend. The total amount of open Long positions is currently twice the amount of Short ones, matching the current situation in the market. The pair is declining, and major market players are largely opening short positions. Geopolitical factors, COT reports, and technical analysis suggests GBP/USD will likely continue its fall.
US and UK economic calendar:
UK - Claimant count change data (06-00 UTC).
UK - Unemployment data (06-00 UTC).
UK - Average Earnings Index (06-00 UTC).
US - CPI data (12-30 UTC).
US - speech by FOMC board member Lael Brainard (16-10 UTC).
Brainard's statements and US inflation data are very likely to influence traders today.
Outlook for GBP/USD:
Traders are recommended to open short positions with 1.2980 and 1.2895 being targets - earlier, the pair settled below 1.3044 on the H4 chart. Long positions can be opened if GBP/USD closes above the trend line on the H4 chart, with 1.3181 and 1.3274 being targets.