FX.co ★ Analysis of GBP/USD on April 27. GBP plunges to new lows

Greetings, dear traders! On the 1H chart, the GBP/USD pair kept falling on Tuesday. At the end of the day, it settled below the level of 1.2600. On Wednesday, it halted its decline, trading below the level of 1.2600. However, there is a high chance of a further drop to 1.2432, which corresponds to the next Fibonacci correction level of 423.6%. If the British currency consolidates above the level of 1.2600, it may rise to 1.2718, which is the Fibo level of 323.6%. The pound sterling has shed 470 pips in less than four days. Besides, there is no need to find a particular reason for its fall. I said earlier that there were no fundamental factors for a downward movement. However, the pound sterling has been dropping in recent weeks, months, and even a year. This is why it will hardly be able to break out of the bearish channel. Analysts reckon that the downtrend of the euro and the pound sterling is absolutely justified. They did not expect such a sharp decrease in these currencies. Yesterday, the US released a report on durable goods orders for March. The reading turned out to be slightly worse than forecasts. Yet, the US currency maintained its bull run.

The consumer confidence index in April tumbled to 107.3 from 107.6. Notably, traders ignored this decrease. Naturally, the figures were not negative enough to halt the downward movement of the currencies. However, strong reports appear quite rarely. This is why investors pay almost zero attention to economic statistics now. Therefore, the main factor that significantly impacts the market sentiment may be the geopolitical conflict. Yesterday, NATO held a meeting among 40 defense ministers in Ramstein, Germany. The conference secured pledges from allies to sustain aid to Ukraine's military. If at the beginning of the special operation, NATO and EU countries refused to supply weapons, now they are ready to send military aircraft, tanks, and other weapons.

On the 4H chart, the pound/dollar pair declined below 1.2674, which is the Fibonacci correction level of 100.0%. The pair may now slide down to 1.2250, which is the next Fibo correction level of 127.2%. The bullish divergence may trigger a reversal. Yet, its rise is likely to be short-lived. The bearish momentum is strong.

Commitments of Traders (COT):

The mood of the "Non-commercial" category of traders has changed significantly over the week. The number of Long-contracts in the hands of speculators increased by 1,297, while the number of Short ones rose by 7,157. Thus, the mood of the major market players has become even more bearish. The ratio between the number of Long and Short contracts still corresponds to the real market situation. The number of long traders exceeds the number of short ones by 2.5 times (95,725 – 36,811). Big market players continue to get rid of the pound sterling. Therefore, the downward movement is likely to persist. COT reports also indicate such a scenario. Apart from that, there are other bearish factors that drat the pounds sterling down.

Macroeconomic calendar for the US and UK

On Wednesday, the economic calendar for the UK is empty. This is why market sentiment will not be affected by fundamental factors today.

Outlook for GBP/USD and trading recommendations:

It would be appropriate to open short positions with a downward target of 1.2432 as the price dipped below the level of 1.2674 on the 4H chart. It is better to open long positions if the price rises above 1.2600 on the 1H chart with targets of 1.2718 and 1.2810.