GBP/USD: plan for the European session on April 22. COT reports. The pound continues to storm hard

Yesterday, bulls on the pound did not try to keep the market under their control, nothing happened. Let's take a look at the 5-minute chart and see what happened. I paid attention to the 1.3072 level in my morning forecast and advised you to make decisions on entering the market from it. A false breakout at 1.3072 at the beginning of the European session led to a signal to sell the pound. As a result, the downward movement amounted to about 25 points, but we did not reach the nearest support at 1.3044. The bulls tried to settle above 1.3072 toward the middle of the day, and again failed, indicating that bulls were not willing to buy at current highs. In the afternoon, a sharp fall of the pound to 1.3023 and the formation of a false breakout there led to an excellent buy signal, after which the pair shot up 50 points. A little later, in the middle of the US session, a buy signal was formed again from the level of 1.3023, but the upward movement there was more modest - 25 points. Failure to settle above 1.3049 and a false breakout provided a sell entry point, which made it possible to pull another 25 points from the market.

To open long positions on GBP/USD, you need:

The statements of Bank of England Governor Andrew Bailey did not have the desired effect, which was quite expected in the current economic realities. Today there are quite important data on the index of business activity in the manufacturing sector, the index of business activity in the services sector and the composite PMI index in the UK. So far, there are no particular problems with these indicators, therefore, in case of growth, the bulls may try to ensure a second jump back to weekly highs. Of course, the best option in the first half of the day would be a false breakout in the area of support at 1.3011. After that you can count on a recovery to the area of 1.3046, where the average moving averages play on the bears' side are. A breakthrough and consolidation above 1.3046 with a reverse test and strong UK data - all this will provide another entry point for long positions with a growth target in the 1.3072 and 1.3097 area, where I recommend taking profits. If the pair goes down and no one wants to buy the pound at 1.3011, and the growth from this level should be lightning fast, I advise you not to force things and postpone entering the market until a larger support at 1.2991. But even there you need to wait for a false breakout to form. If the bulls are not active there - the best scenario would be long positions for a rebound from 1.2974, or from a new monthly low - 1.2950, based on an upward correction of 25-30 points within the day.

To open short positions on GBP/USD, you need:

The main goal for today is a breakthrough of the immediate support of 1.3011, since people are unlikely to be willing to quickly buy the pound below this level, especially after yesterday, as Federal Reserve Chairman Jerome Powell supported an interest rate hike by half a point at a meeting to be held next month. A breakthrough and reverse test of this range from the bottom up creates a sell signal, which will quickly push the GBP/USD to the area of the lows: 1.2991 and 1.2974, where I recommend taking profits. A more distant target will be the area of 1.2950, but it will be possible to reach it only in case of very weak statistics on the UK. In case GBP/USD grows, the bears will try to do everything to prevent the exit above the resistance of 1.3046. Forming a false breakout there will be an excellent signal to sell in order to resume the bear market. If there is no activity around 1.3046, the bulls will continue to push the pair up. Then I advise you to postpone short positions until the next major resistance at 1.3072. I also advise you to open short positions there only in case of a false breakout. You can sell GBP/USD immediately on a rebound from the high of 1.3097, counting on the pair's rebound down by 30-35 points within the day.

I recommend for review:

The Commitment of Traders (COT) report for April 12 logged an increase in short positions and a reduction in long ones. All this once again confirmed the attitude of traders to the British economy, which is teetering on the brink of recession mixed with the highest inflation for a long period of time. The sharp rise in the consumer price index in March this year to another high of 7.0% once again proved the complexity of the situation in which the Bank of England (BoE) found itself, but the report on UK GDP, on the contrary, did not please traders much. The situation will only worsen, as future inflation risks are now quite difficult to assess due to the difficult geopolitical situation, but it is clear that the consumer price index will continue to grow in the coming months. At the same time, the soft position of the governor of BoE will push prices up. The pressure on the pound is also increasing due to the aggressive policy of the Federal Reserve, 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 in the direction of selling the pound against the US dollar. The COT report for April 12 indicated that long non-commercial positions decreased from the level of 35,873 to the level of 35,514, while short non-commercial positions jumped from the level of 77,631 to the level of 88,568. This led to an increase in the negative value of the non-commercial net position from -41,758 to -53,054. The weekly closing price decreased from 1.3112 to 1.3022.

Indicator signals:

Trading is below the 30 and 50-day moving averages, but this does not yet indicate a large advantage for the bears.

Moving averages

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

In case of growth, the upper border of the indicator around 1.3055 will act as resistance. If the pound falls, the lower border of the indicator in the area of 1.3010 will provide support.

Description of indicators