The GBP / USD currency pair was trading very chaotic on Monday, April 26th. Yesterday we assumed that it could trade in the “swing” mode on the 4-hour timeframe, but in reality the “swing” was observed even on the 5-minute timeframe. Thus, the nature of the current movements of the pound sterling makes us even recommend traders not to work with this pair for a while, because at this time it brings mostly losses. Let’s analyze today’s deals and see what could have been done. The first thing that catches your eye is the inaccurate development of the Kijun-sen line. The price seemed to have consolidated above it, but was unable to continue moving down. The price seems to have consolidated below this line, but at the same time it returned back to it in an hour. In total, the pound / dollar pair changed its direction of movement on Monday at least 6 times. A false buy signal immediately formed near the critical line, which brought 18 points of loss, then a false signal to sell, which brought 16 points of loss. Further, it was no longer necessary to trade from the Kijun-sen line, since two false signals are no joke. But after that, false signals continued to form around the extremum level of 1.3886. It is good that around this time the publication of a report on durable goods orders in the USA was planned, therefore, when any signal was processed, a sharp reversal could occur, therefore, it was not necessary to work on an increase when rebounding from the level of 1.3886. The same applies to a sell signal to overcome the level of 1.3886, which also turned out to be false. Thus, it was trite luck that no trades should have been opened here. Further, of course, one should not have traded from the level of 1.3886, especially since the pair returned to it and began to “dance” around it altogether. Thus, it is a very unlucky day for traders, the “swing” of the pound / dollar pair, losses. Perhaps, you should not trade the pair for several days in order for it to “come to its senses”.
On the hourly timeframe, the technical picture still requires no explanation. The uptrend is maintained thanks to the weak uptrend line, and the rebound from it provoked a not too strong upward movement. Unfortunately, the pound sterling continues to move in the swing mode on the 4-hour timeframe, and now on the lower time frames as well. Therefore, despite the fact that according to the “technique” we can now expect the resumption of the upward movement, it is quite possible that the pair will continue to move down another 150 points, breaking the trend line. On Monday, the level of 1.3886 was overcome several times, so we are deleting it from the list of important levels for now. Will pay attention to the most important levels and lines on Tuesday. The most important levels for today are 1.3945 and 1.3835. Also important are the Kijun-sen (1.3915), Senkou Span B (1.3839) lines and the trend line – signals can also form around them. As before, it is recommended to set the Stop Loss level at breakeven when the price passes 20 points in the right direction. The nearest level / line is always used as targets (exceptions – if the target is too close to the signal). There are no major events scheduled for Tuesday, April 27 in the UK, and in the US it is only an indicator of consumer confidence, which is unlikely to cause a strong market reaction. We also recommend to stop trading at the slightest sign of continuation of the “swing” on the 5-minute timeframe.
We also recommend that you familiarize yourself with the forecast and trading signals for the EUR / USD pair.
Recall that during the last reporting week (April 13-19), the GBP / USD pair rose by 200 points. As for the COT report, the latest report showed no significant changes in the balance between buy and sell contracts for a group of non-commercial traders. During the reporting week, non-commercial traders opened 10.5 thousand Buy-positions and 8.2 thousand Sell-positions. Thus, their net position increased slightly, by 2.3 thousand contracts, and the mood became a little more “bullish”. However, these are not changes on the basis of which new conclusions can be drawn. In general, the uptrend for the pound remains, and this is the most important thing. As in the case of the European currency, the COT reports now do not signal at all that the upward trend is maintained, and the key influence on the pair rate is exerted by the factor of the injection of trillions of dollars into the American economy, and not by the behavior of large players. If you look at the first indicator, you can see how the red and green lines often crossed, which indicates that there is no clear idea in which direction to trade the pound at all! Now the green and red lines have moved away from each other, which formally means an uptrend. Therefore, based only on the COT reports, we can also assume further upward movement. However, we have already said that it will be very difficult for the pound to grow from a purely technical point of view, since this growth is already completely unreasonable. Although another couple of trillion dollars in the US economy – and even the pound sterling will be able to continue strengthening, despite the problems with the Northern Ireland Protocol, despite the Scottish question, despite the weak recovery and a possible drop in GDP in the first quarter, despite the general decline economy due to Brexit and not very bright prospects.
Explanations for illustrations:
Price levels of support and resistance (resistance / support) – levels that are targets when opening purchases or sales. You can place Take Profit levels near them.
Kijun-sen and Senkou Span B lines – Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour timeframe.
Support and resistance areas are areas from which the price has repeatedly bounced off.
Yellow lines – trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the “Non-commercial” group.