FX.co ★ GBP/USD: technical analysis on March 27, 2023

Hello, dear traders! In the 1-hour time frame, GBP/USD settled below the ascending trend corridor and the 1.2238 mark on Friday. The price may drop to the 127.2% Fibonacci level of 1.2112. Near-term growth does not seem likely.

On Friday, Britain delivered data on business activity. In fact, bullish activity decreased after the release. Anyways, it would have happened anyway as the bulls had pushed the price too high. Business activity fell slightly both in the services sector and the manufacturing sector. Meanwhile, UK retail sales came out better than expected. Including fuel sales, figures rose by 1.2% in February. Excluding fuel sales, the reading was up by 1.5%.

US Durable Orders declined by 1% in February and business activity increased by 2-3 points in March. Because the data came mixed, the greenback traded in a flat trend in the North American session. In my view, the bulls are likely to lock in profits on long positions after a quite prolonged uptrend. Therefore, the pound could be bearish against the dollar this week. If Governor Andrew Bailey makes some optimistic remarks today and tomorrow, this could trigger gains in the pound. The UK won't avoid a recession. The Bank of England has already reduced the pace of rate hikes to the maximum. Consequently, the governor will hardly announce another 0.50% rate increase.

In the 4-hour chart, the pair reversed to the downside after the formation of a bearish MACD divergence. The price is now on its way to the 127.2% Fibonacci level of 1.2250. Its movement is slow, but consolidation below the mark will increase the likelihood of a bearish continuation toward 1.2008. There is also growth potential should the quote close above the descending trend corridor.

Commitments of Traders:

The sentiment of non-commercial traders barely changed in the reporting week. Speculators closed 3,682 long positions and 498 short ones. Overall, sentiment is still bearish with a wide gap between shorts and longs. Over the past several months, the pound has gained potential, but there is still a wide gap between positions. The pound has been in a flat trend for a few months now. In the 4-hour time frame, the pair left the limits of the descending corridor, which may provide support for the pound. Anyway, there are now many contradicting factors, and fundamentals provide little support for the pound.

Macroeconomic calendar:

United Kingdom: Governor Bailey's Speech (17-00 UTC).

The macroeconomic calendar contains a sole major event on Monday. Therefore, fundamental factors may have a mild influence on market sentiment.

Outlook for GBP/USD:

The trading plan will be to sell after a bounce off 1.2342, targeting 1.2238. If the pair closes below 1.2238, we sell with the target at 1.2112. Due to the close below the ascending corridor in the 1-hour chart, we don't sell.