Many signals were formed to enter the market on Friday. Let's look at the 5-minute chart and figure out what happened. The British pound collapsed at lightning speed after the terrible statistics on retail sales in the UK, and data on activity in the manufacturing and services sectors finished off the pound completely. In my Friday morning forecast, I paid attention to several levels, but I did not expect such a large sell-off. The sharp fall of the pound was restrained only in the area of 1.2911. A false breakout at this level led to a buy signal based on a slight upward rebound – this happened. Then there was a breakthrough and a return under 1.2911, and a test of this area from the bottom up provided a signal to open new short positions with the prospect of a decline to the area of 1.2856, which subsequently happened. The upward correction to the area of 1.2906 in the afternoon and the bears actively protecting this level – all this made it possible for us to get an excellent entry point into short positions, which led to another fall of the pair to the area of 1.2856. Consolidating below this level only increased the pressure on the pound, providing you with another entry point for short positions.
To open long positions on GBP/USD, you need:
As I mentioned, weak reports from last Friday and Bank of England Governor Andrew Bailey's statements that "everything is bad" and the economy is heading for recession, pulled down the British pound, which is still under pressure today. At the time of writing, the pair is sliding with confident steps to the 27th figure, the test of which will definitely happen in the near future. It is difficult to say what the observed bear market can stop. There are no objective reasons for this yet. Therefore, I advise you not to rush with your long positions. You can count on a false breakout in the area of the first support of 1.2749 within the day. After that, you can bet on restoring the pair to 1.2807, but no more. A breakthrough and consolidation above 1.2807 with a reverse test and strong data on the balance of industrial orders according to the Confederation of British Industry – all this will provide an additional entry point into long positions with a perspective of growth in the area of 1.2856, where the moving averages are playing on the bears' side. I recommend taking profits there. If the pair declines and people are not willing to buy the pound at 1.2749, and most likely it will be the case, I advise you not to force events and postpone entering the market until a larger support of 1.2689. But even there you need to wait for a false breakout to form. In case bulls are not active there, the optimal scenario will be long positions for a rebound from 1.2645, or from a new monthly low – 1.2585, 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 nearest support of 1.2749, since below this level there are unlikely to be those willing to buy the pound immediately, especially after Bailey's recent statements and fundamental reports. A breakthrough and a reverse test of this range from the bottom up creates a sell signal that will quickly push GBP/USD into the area of the lows: 1.2689 and 1.2645, where I recommend taking profits. The 1.2585 area will be the next target, but it is unlikely to be possible to reach it at the beginning of the week. In case GBP/USD grows, the bears will try to do everything to prevent an exit above the resistance of 1.2807. Forming a false breakout there will be an excellent sell signal in order to continue the bear market. If traders are not active in the 1.2807 area, the bulls will continue to push the pair up. Then I advise you to postpone short positions until the next major resistance of 1.2856, where the moving averages are playing on the bears' side. I also advise you to open short positions there only in case of a false breakout. It is possible to sell GBP/USD immediately for a rebound from a high like 1.2906, 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, which indicates a resumption of the bearish trend.
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 limit of the indicator around 1.2880 will act as resistance.
Description of indicators
Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9Bollinger Bands (Bollinger Bands). Period 20 Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.Long non-commercial positions represent the total long open position of non-commercial traders.Short non-commercial positions represent the total short open position of non-commercial traders.Total non-commercial net position is the difference between short and long positions of non-commercial traders.