Hi, dear traders!
According to the H1 chart, GBP/USD bounced off the retracement level of 200% (1.3071) twice before moving downwards towards 1.2980. Earlier, the pair has rebounded off this level several times over the past few weeks. GBP/USD has been moving in the 1.2980-1.3071 range recently - there was nothing that could push it upwards, and bulls did not take the initiative. Now, traders have picked a side after several weeks of indecision, pushing the pair down by 160 pips after the release of UK retail sales data for March. According to the Office for National Statistics, sale volumes including fuel declined by 1.4% month-over-month. Traders expected sales to decrease by 0.3%.
Retail sales data is not particularly important for the economy, and the gap between projected and actual sales is not large. However, traders did not have such a reaction to UK GDP, unemployment, and inflation data. It seems bearish traders decided to concentrate their efforts on breaking through 1.2980. The quote began to fall at the exact moment the retail sales data was released. Other events of Thursday and Friday are not particularly important at this point. Andrew Bailey did not state anything interesting at the IMF yesterday. The chairman of the Federal Reserve Jerome Powell indicated that the regulator could increase the interest rate in May by 0.50%, but the markets are already convinced the Fed will hike the rate aggressively. Powell's statements are not particularly important at this point, and the USD is moving upward anyway.
According to the H4 chart, the pair reversed downwards and moved down strongly towards 1.2860. Today, GBP/USD has successfully reached this level. A bounce off this level would lead to some upward movement for the pair, but it is not likely to persist. There are hardly anything that would give support to an uptrend.
Commitments of Traders (COT) report:
The mood of Non-commercial traders changed significantly over the last week covered by the report. Traders closed 359 Long positions and opened 10,937 Short positions, indicating a significant bearish trend. The total amount of open Long positions is currently still 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 - Retail sales with auto fuel (06-00 UTC).
UK - Manufacturing PMI (08-30 UTC).
UK - Services PMI (08-30 UTC).
US - Manufacturing PMI (13-45 UTC).
US - Services PMI (13-45 UTC).
UK - Speech by Andrew Bailey, Governor of the Bank of England (14-30 UTC).
This morning's data releases sent the pound sterling down, but it was long overdue. Today, Andrew Bailey is set to speak again at the IMF summit, but his speech is unlikely to be quite different from his statements yesterday.
Outlook for GBP/USD:
Earlier, traders were recommended to open short positions if the pair bounced off 1.3071 on the H1 chart, with 1.2980 being the target. GBP/USD eventually fell to 1.2895. Opening long positions is not recommended - there are no buy signals, and the pair could resume its downward movement.