In my morning forecast, I drew attention to the level of 1.2484 and recommended making decisions on entering the market from there. Let's look at the 5-minute chart and figure out what happened there. The breakthrough and reverse test of 1.2484 after the release of data on manufacturing activity, which turned out to be better than economists' forecasts, allowed for a sell signal for the pound, which at the time of writing the article resulted in a decline of more than 30 points for the pair. The technical picture was revised for the second half of the day.
To open long positions for GBP/USD:
The PMI manufacturing activity indices indicated a contraction in the UK, so another interest rate hike will harm the economy even more. Many market participants understand this and quickly build long positions for the pound. Today, US reports are being released. Good indicators for the change in the volume of manufacturing orders, as well as the growth of the vacancy rate and labor turnover from the US Bureau of Labor Statistics, will only intensify the pressure on the pair.
For this reason, I will not rush to open long positions. A decrease and formation of a false breakout at 1.2442—support formed based on the results of last week—will allow for a new entry point for long positions with the prospect of a surge in the area of 1.2476. A breakthrough and reverse test from top to bottom of this new level will form an additional signal to buy the pound with a movement to 1.2508. The ultimate target will be the area of 1.2543, where I will fix the profit.
In a scenario of a decline to around 1.2442 without activity from the bulls, it is better not to rush with purchases. In this case, I will open long positions only on a false breakout in the area of the next support level of 1.2413. I plan to buy GBP/USD immediately on a rebound, only from the minimum of 1.2387, to correct by 30-35 points within the day.
To open short positions on GBP/USD, the following is required:
Sellers have shown themselves and are trying to cling to weekly lows. A good scenario would be selling from the new resistance of 1.2476, which may occur after a spike in volatility due to mixed US data. A false breakout there will provide a chance for a repeated downward movement of the pound with the prospect of updating the support level of 1.2442. A breakthrough and a reverse test from the bottom to the top of this range will increase the pressure on GBP/USD, forming a sell signal with a drop to 1.2413. The furthest target remains the minimum of 1.2387, where I will fix profits.
In the case of GBP/USD growth in the second half of the day and the absence of activity at 1.2476, which is also quite likely, especially considering how speculators will be active this week before the important Fed meeting, it is best to postpone sales until the test of the next resistance level of 1.2508. Only a false breakout there will provide an entry point for short positions. In the absence of a downward movement there, I will sell GBP/USD on a rebound immediately from the maximum of 1.2543, but only with the expectation of a correction of the pair downward by 30-35 points within the day.
In the COT report (Commitment of Traders) for April 25, there was an increase in both long and short positions, but there were more long positions. Everyone understands that the Bank of England has nowhere to go and has no choice but to continue raising interest rates, as it has yet to achieve significant results or progress in combating inflation recently. High-interest rates will, in any case, support the pound, maintaining demand for it. Considering the current state of the US economy, which is stubbornly resisting cooling down but will have to do so, buying the pound against the dollar does not seem like such a hopeless case. The latest COT report states that non-commercial short positions increased by 1,034 to 53,566, while non-commercial long positions jumped by 5,571 to 59,405. This led to an increase in the non-commercial net position to 5,839 compared to 1,302 a week earlier. Growth has been going on for the fifth week in a row, also confirming the bullish nature of the market. The weekly closing price decreased to 1.2421 compared to 1.2446.
Indicator signals:
Moving averages
Trading is taking place below the 30- and 50-day moving averages, indicating a further decline in the pair.
Note: The author considers the moving average period and prices on an hourly chart H1 and differ from the general definition of classic daily moving averages on the daily chart D1.
Bollinger Bands
In the event of a decline, the lower boundary of the indicator, around 1.2455, will act as support.
Description of indicators
• Moving average (defines the current trend by smoothing volatility and noise). Period 50. Marked in yellow on the chart.
• Moving average (defines the current trend by smoothing volatility and noise). Period 30. Marked in green on the chart.
• MACD Indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages) Fast EMA period 12. Slow EMA period 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-commercial traders - speculators, such as individual traders, hedge funds, and large institutions, using the futures market for speculative purposes and meeting certain requirements.
• Non-commercial long positions represent the total long open position of non-commercial traders.
• Non-commercial short positions represent the total short open position of non-commercial traders.
• The total non-commercial net position is the difference between the short and long positions of non-commercial traders.