The GBP / USD currency pair on Monday, May 3, also traded higher after the drop in quotes on Friday. However, if the euro corrected by 50 points, then the pound sterling leveled off almost all Friday’s losses. Since the movement for the pound was stronger, much more signals were formed during the first trading day of the week. Recall that on the older timeframes, the “swing” movement is preserved. In the UK, no important macroeconomic statistics were planned for Monday, so traders could only pay attention to the US ISM Manufacturing PMI (marked “1” in the illustration) throughout the day. However, before that moment, the pair had already managed to go up more than 100 points, and after the publication of this report, the movement only continued, as the ISM index turned out to be much weaker than forecasts. The first trading signal was formed at the very beginning of the European session in the form of a price rebound from the extremum level of 1.3807. This is where traders had to open long positions. The next level that the price met on the way turned out to be the extremum level of 1.3835, which was immediately overcome, so here traders had to stay long. The next line was the Senkou Span B line, which the price also crossed without any problems, therefore, buy orders still had to be opened. The pair bounced only from the extremum level of 1.3886, which served as a signal to close longs and open shorts. In total, about 55 points could be earned on a long position. The sell signal in the form of a rebound from the level of 1.3886 turned out to be false, so traders could have received a loss of 14 points on it. But a little later the price broke through the level of 1.3886 and here it was necessary to open longs again. The price moved above the critical line, and the next target level was 1.3975, which was located very far away. Thus, long positions could be closed 2-3 hours before the start of Jerome Powell’s speech, that is, about 25 pips in profit. In total, traders could have earned about 65 points of profit yesterday, which is just fine for a corrective Monday.
On the hourly timeframe, the power of the upward movement on Monday is seen much better. The bulls managed to level out almost all the losses on Friday, which once again proves the “swing” mode of the pound / dollar pair. Moreover, the “swing” is preserved on all timeframes, perhaps, with the exception of the 5-minute one. Also, on the hourly timeframe, there is no pronounced trend, as well as a trend line or channel. Although the current movement cannot be called a flat, the trend is clearly absent. Therefore, this point must be clearly understood before entering the market. The price can move in any direction with any force. We believe that this week the pair can calmly resume its movement down 200 points within the “swing” from the 4-hour timeframe. We will continue to pay attention to the most important levels and lines on Tuesday: 1.3835, 1.3886, 1.3975 and 1.4008, as well as the Kijun-sen (1.3888), Senkou Span B (1.3860) lines. It is recommended to set the Stop Loss level at breakeven when the price passes in the right direction by 20 points. The closest level / line should always be used as targets (exceptions – if the target is too close to the signal). There are no major events scheduled for Tuesday May 4th in the UK or the United States. However, this does not really matter for the pair now, since its movements are practically unpredictable in any case.
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 20 – 26), the GBP / USD pair fell by 90 points. The last few COT reports have shown that the mood among professional players is again becoming more “bullish”, but in general they themselves do not know what to do with the pound sterling in the past year. Look at the first indicator in the illustration below the chart. The green line is the net position of the “Non-commercial” group of traders. It constantly changes the direction of movement, intersects with the red line (net position of the “Commercial” group). In general, it is now impossible to predict the further movement of the pair based on COT reports. From October to March, the pound sterling rose in value against the dollar, although the green and red lines at that time showed no trend. During the reporting week, major players closed 1.1 thousand buy contracts and got rid of 5 thousand sell contracts. Thus, their net position increased by 3.9 thousand contracts, and the mood again became more “bullish”. In general, it also remains “bullish”, since the total number of buy contracts from professional players exceeds the total number of sell contracts by 2 times. Thus, of course, we can expect further growth in quotations of the British pound, but we still believe that the swing will continue at this time. Too many conflicting factors are at the disposal of the markets. Constant changes in the direction of movement of the green line indicate that large players in the long term do not themselves know what to do with the pound sterling.
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 – the lines of the Ichimoku indicator 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.