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Trading plan for the GBP / USD pair for the week of May 3 – 7. New COT (Commitments of Traders) report.


The GBP / USD currency pair was also in an upward movement for most of the past week, but only Friday canceled all the efforts of the bulls. Quotes of the pair fell down by 120 points, and if in the euro currency this fall can be explained by profit-taking on long positions, then for the pound sterling this explanation looks very doubtful, since there was no strong growth before this fall. On the contrary, the pair continues to move in the “swing” mode, and we have been warning all last week that just the pound sterling may resume its downward movement, as it was necessary to work out a new round of the downward movement by 250-300 points down. Thus, it turns out that the pound sterling should have fallen due to the “swing”, and the European currency – due to the need to correct after a strong trend. These two factors coincided and on Friday (the last trading day of the week and month) there was a collapse. It, of course, was very difficult to predict, but, as you can see, everything looks very logical. The pound sterling, as a currency that does not have a clear direction and trend now, may continue to move down next week. We believe that the pair is quite capable of falling by another 100-150 points, that is, to the previous local minimum. Further, a new round of upward movement may follow within the same “swing”. So far, we do not see what has changed in the market or in the fundamental background for the pair itself to start moving in some other way. The fundamental background has long been ignored by traders, otherwise the British currency would have to be caught near the 30th level. Macroeconomic statistics are also often ignored. Two global factors remain. The factor injecting trillions of dollars into the American economy and the “speculative factor.” The first, we believe, can help the pair continue to grow in 2021, and the second – prevents the quotes from falling significantly at this time.

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Report COT.

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 this 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”. On the whole, 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.

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No macroeconomic reports were published in the UK this week. All traders’ attention is now drawn to the upcoming elections to the Parliament of Scotland, scheduled for May 6, to the riots in Northern Ireland, which London still refuses to solve, to the scandal with Boris Johnson and his phrase about “mountains of corpses”, as well as to the renovation of the Prime Minister’s apartment. Minister, the funds for which came from is not entirely clear where. All these news and topics hardly had any influence on the movement of the pair, which remains in the “swing” mode. American statistics and the “foundation” also did not have a special influence on the movement of the pair. To begin with, nothing extraordinary is happening in the States right now. Yes, the media and investors are actively discussing a possible tax hike for wealthy Americans, for large corporations, a single corporate tax for all countries of the world, and another package or even two packages of stimuli for the US economy initiated by Joe Biden. But so far these are not specific bills, but only proposals. And what impact can they have on the dollar? If trillions of dollars are allocated, then a new fall in the American currency should be expected.

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Trading plan for the week of May 3 – 7:

1) The pound / dollar pair made a couple of attempts to resume the upward movement, but so far it is moving more in the “swing” mode without a clear trend. Thus, there is simply no uptrend right now. Even the price fixing above the Ichimoku cloud or the critical line does not give any advantage to the buyers of the pound. Thus, while the prospects for the pound sterling can be called “uncertain”.

2) Sellers still do not have the strength to start a downtrend. Formally, since the pair has consolidated below the Senkou Span B and Kijun-sen lines, the downward movement may continue, however, we do not count on the downward movement by more than 100-150 points. We recommend trading the pair at this time using lower timeframes, where tendencies and trends still manage to form and work out at least a little.

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.

Indicators Ichimoku, Bollinger Bands, MACD.

Support and resistance areas are areas from which the price has repeatedly bounced off.

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.

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