GBP/USD 5M
The GBP/USD pair began to trade not just in the "swing" mode, but in the "storm" mode or in the "high-volatility swing" mode on Thursday, May 6. Fortunately, traders knew what to expect from yesterday, as an important event in the form of summing up the results of the Bank of England meeting was planned for Thursday in advance. Yesterday we assumed that the Bank of England will not make any important decisions, and representatives of the BoE will not provide the markets with any important information. And so it happened in practice. There was nothing important in the cover letter. The BoE will continue to stimulate the economy until inflation reaches a stable 2% in the medium term and the economy recovers from the coronavirus crisis. Unlike the United States, Britain will have to wait a long time for these results. In addition to the BoE meeting, the service business activity index (figure "1" in the chart) was published in the UK in the morning, which did not cause any market reaction. BoE Governor Andrew Bailey's speech was on some calendars, but not on European ones. Afterwards, the United States published a report on applications for unemployment benefits, which supported the dollar in the form of +20 points, but did not have a serious impact on the course of trading. So, what can we say about it? No signal formed in the morning and in general there was an open flat. A little closer to noon, trading should not have been given for any signals, since no one knew how the market would react to the results of the BoE meeting and whether there would be any surprises from the central bank itself. It was also not recommended to trade at the US trading session, since the summing up of the results of the BoE meeting began literally an hour before the US session opened. As a result, the pound/dollar pair "danced" all day, ignoring all important lines and levels, which is not surprising, since the markets yesterday traded exclusively on the foundation, which everyone interpreted in their own way. Thus, trades should not have been opened yesterday.
GBP/USD 1H
On the hourly timeframe, the pound dollar pair has been jumping from side to side throughout the past day. One could not even dream of any calm movement. The pair was trading in a flat for the last couple of days, yesterday - in a "high volatility swing". In general, it was impossible to trade in this movement. The price rebounded from the resistance level of 1.3927 once again, and an extremum level of 1.3931 was formed, which may help in future trades. Also, the price bounced off the Kijun-sen line twice, but was only rebuilt after it. On the whole, the "swing" mode remains for the pound, and practically on all timeframes. We still believe that this week the pair can calmly resume its movement down 200 points within the swing from the 4-hour timeframe. Thus, we continue to pay attention to the most important levels and lines: 1.3835, 1.3886, 1.3931 and 1.3975. Senkou Span B and Kijun-sen lines are not strong now, as there is a flat on the 4-hour timeframe. You are advised to set the Stop Loss level at breakeven when the price passes 20 points in the right direction. Today, the UK construction business report (up to 20 pips reaction) will be released, with speakers from the Bank of England Ben Broadbent and Andy Haldane. More important events scheduled for the afternoon. The United States will publish the most important reports on NonFarm Payrolls, unemployment rate and average wages. I don't want to remember how the markets reacted to the latest report on Nonfarm (no way, - author's note). I would like to hope that this time everything will be different. At the same time, the reaction can be strong, so trading at this time should be as careful as possible or not trading at all.
We also recommend that you familiarize yourself with the forecast and trading signals for the EUR/USD pair.
COT report
The GBP/USD pair fell by 90 points during the last reporting week (April 20-26). The last few Commitment of Traders (COT) reports have shown that the mood among professional players is becoming more bullish again, but in general they themselves do not know what to do with the pound in the past year. Look at the first indicator in 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 pair's succeeding movement based on COT reports. The pound rose in value against the dollar from October to March, although the green and red lines showed no trend at that time.
Major players closed 1,100 buy contracts (longs) and got rid of 5,000 sell contracts (shorts). Thus, their net position increased by 3,900 contracts, and the mood became more bullish again. In general, it also remains bullish, since the total number of buy contracts from professional players exceeds the total number of sell contracts twice. And so, of course, we can expect the pound to rise further, 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 big players do not know what to do with the pound in the long term.
Explanations for the chart:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are 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.
