Hi, dear trades! On the 1H chart, the GBP/USD pair fell to 1.2980 today. Last week, it rebounded twice from this level. This morning, it lacked only 6 pips for approaching the indicated level. However, the pound sterling managed to rise slightly. However, in the second half of the day, the US dollar is growing again. So, in the short term, I expect the third fall to the level of 1.2980. After that, there could be a rebound to 1.3071, then the price is likely to close below this level. If so, the pair is sure to decline the Fibonacci corrective level of 1.2895. Besides, there are currently no fundamental factors that could boost the euro or the pound sterling. The geopolitical tensions persist. This is why the pressure on these currencies remains. The Fed is planning to raise the interest rate at least 10 times in the next two years. The regulator may even hike the key rate by 0.5% and even 0.75%. It has clearly moved to a more aggressive monetary policy tightening. It is extremely bearish for the stock market. The Fed will tighten monetary policy, taking into account only the inflation rate. Market participants are unlikely to see the effect of monetary policy tightening on inflation in the short term.
James Bullard, a prominent hawk, said yesterday that the key rate should be raised to 3.5% in the near future. At the May meeting the possibility of raising the rate by 0.75% at once will also be considered, he noted. Bullard also pointed out that at all the next six meetings in 2022, the Fed could raise the rate by 0.5%. Even if the other FOMC members are against such an aggressive tightening, such statements mean that the Fed no longer believes that inflation will somehow ease in the future. The global economy is likely to face new problems due to the crisis in Ukraine. commodity prices are soaring. The military conflict risks spilling outside Ukraine's borders. Logistics chains are experiencing disruptions. Apart from that, a food crisis may begin in Europe. All these problems will only fuel inflation.
On the 4H chart, the pound/dollar pair slightly climbed, consolidating above the descending trend line. However, the pair managed to return to 1.3044, the Fibonacci correction level of 76.4%, amid the bearish divergence of the CSI indicator. After that, it closed below the indicated level. Thus, the price is likely to slide down to the next level of 1.2860. If so, you may forget about the trend line.
Commitments of Traders (COT):
Commitments of Traders (COT):
The mood of the "Non-commercial" category of traders has changed significantly over the past week. The number of Long contracts in the hands of speculators decreased by 359, while the number of Short contracts rose by 10,937. Thus, the mood of the major market players has become more bearish. The ratio between the number of Long and Short contracts still corresponds to the market satiation. The number of long traders is 2.5 times higher than short ones. Market players continue to get rid of the pound sterling. I expect the pound sterling to keep declining. This forecast is based on the geopolitical situation, COT reports, and technical analysis.
Macroeconomic calendar for the US and the EU:
US- FOMC member Charles Evans will deliver a speech (16:05 UTC).
On Tuesday, the economic calendar for the UK is completely empty. Charles Evans will make a speech today. This is why there are no drivers that could change market sentiment.
Outlook for GBP/USD and trading recommendations
It is recommended to open short positions on the pound steeling at 1.2980 if the pair drops from 1.3071 on the 1H chart. Now, it is possible to keep these trades open. It is better to open long positions at 1.3071 if it rises from the 1.2980 level on the 1H chart.