Long-term perspective.
The GBP/USD currency pair has grown by literally 30 points during the current week. On Wednesday this week, the British currency showed an impressive growth of 170 points, which was not provoked by any specific event. It is still impossible to give a clear answer to the question of what happened at the American trading session on Wednesday when the US dollar began to fall sharply. Note that the pair had plenty of reasons for high volatility and strong movements. What are the two inflation reports in the UK and the USA worth? However, both the first and the second reports, by and large, were ignored, although both showed a new acceleration in price growth. How was it in practice? On Wednesday morning, a report on British inflation is released and after it, the pound falls by 30 points, and then it grows by the same amount. This is where the movement ends. And at about 5-6 in the evening, when no important reports and events are planned, a powerful growth of 150 points begins, which the next day is replaced by a slightly less strong fall, when there were no macroeconomic statistics either because the ECB meeting and Christine Lagarde's speech have nothing to do with the dollar or the pound. As a result, we are inclined to believe that the reason for such strong growth was technical. The pound once again tried to overcome the level of 1.2981, which is a 15-month low for the pair, but again unsuccessfully. It is also possible that information has not been publicly available that could provoke a strong fall in the US currency, this may also be. However, in any case, this growth of the pair was not a "lifeline" for the British currency. At the moment, it is only 70 points above its lows for 15 months and may well continue to fall, given the macroeconomic, geopolitical, and fundamental backgrounds.
COT analysis.
The latest COT report on the British pound has witnessed a new strengthening of the "bearish" mood among professional traders. During the week, the Non-commercial group closed 0.3 thousand buy contracts and opened 10.9 thousand sell contracts. Thus, the net position of non-commercial traders decreased by another 11 thousand. For the pound, such changes are significant. The Non-commercial group has already opened a total of 88.6 thousand sales contracts and only 35.5 thousand purchase contracts. Thus, the difference between these numbers is almost threefold. This means that the mood of professional traders is now "pronounced bearish". Thus, this is another factor that speaks in favor of the continuation of the fall of the British currency. Note that in the case of the pound, the COT report data is completely different from the data on the euro currency. According to the pound, the mood of the major players changes every couple of months, but at this time it corresponds to what is happening in the market. The net position of the "Non-commercial" group has already fallen to the levels where the last round of the pound's fall ended (the green line on the first indicator). Thus, we can even assume that in the coming weeks the pound will try to start a new ascent. However, the current fundamental and geopolitical background does not give good reasons to expect strong growth of the British currency.
Analysis of fundamental events.
As mentioned above, there was plenty of macroeconomic information this week both in the States and in the UK. For example, only in Britain data on GDP, industrial production, trade balance, unemployment, applications for unemployment benefits, average wages, and inflation were published. Most of these reports were pretty good, only industrial production disappointed. GDP turned out to be only slightly lower than forecasts, which is not critical, but unemployment is falling, and inflation is growing, but the Bank of England has something to deal with it. Therefore, this week the pound could well show a logical and reasonable growth. However, "macroeconomics" does not have too strong an impact on the market right now. More important factors are the military conflict in Ukraine, which may flare up with renewed vigor in the coming days/weeks, the status of the "reserve currency" of the US dollar, as well as the fact that the American economy will suffer much less than the British or European due to geopolitics in Eastern Europe.
Trading plan for the week of April 18-22:
1) The pound/dollar pair completed a weak correction and resumed falling. Now the key level for the pair remains 1.2830 (50.0% Fibonacci), on overcoming or overcoming which the further long-term prospects of the pound depend. However, given the general market mood, COT reports, geopolitical and fundamental backgrounds, it is unlikely that strong growth of the British currency can be expected now. Therefore, the pair's sales with a target of 1.2830 remain relevant.
2) The prospects for the British currency remain rather vague and so far there is not a single reason to buy the pound/dollar pair. This is indicated by the technique since even during the last round of growth, the price failed to update its previous local peak or overcome the critical line. This is evidenced by geopolitics since the pound remains a riskier currency than the dollar. This is indicated by macroeconomics since the economy in the UK is in a worse state than the economy in the US. There are no grounds for buying a pair on a strong downward trend.
Explanations of the illustrations:
Price levels of support and resistance (resistance /support), Fibonacci levels - target levels when opening purchases or sales. Take Profit levels can be placed near them.
Ichimoku indicators (standard settings), Bollinger Bands (standard settings), MACD (5, 34, 5).
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.