Long-term perspective.
The GBP/USD currency pair declined by another 80 points during the current week and again found itself near its 15-month lows. And even updated them. Few people now believe that this will be the end of the fall of the British currency. We have already said earlier that the pound has been famous for being more resistant to the dollar in the last year than the euro currency. Its fall was weaker, and the corrections were deeper. However, the last month has clearly shown that at the moment the bulls cannot even adjust the pairs in the same style. As part of the last round of correction, the price failed to reach even the critical line and resumed falling. Thus, most likely, a new round of downward movement awaits traders here too. There were practically no macroeconomic events in the UK this week. Therefore, all the attention of traders has focused again on geopolitics, sanctions, and statements by top officials of Britain. This week, British Foreign Minister Liz Truss, who said several times that sanctions pressure on Russia should be increased, blocked an emergency meeting of the UN Security Council initiated by Moscow and also called for Russia to be excluded from all international organizations like UNESCO, the UN, the WTO. This news does not have a strong value for the pound, since the UK itself has already used its most important weapon - announcing the rejection of Russian oil and gas by the end of the year. In addition, London plans to develop its oil fields in the North Sea, and the States will supply gas. Thus, the British can only exert pressure on the financial sector and block the property of Russian oligarchs on their territory. What London is actively doing. However, the pound/dollar pair was more influenced this week by the tightening of the rhetoric of the Fed representatives and the Fed protocol, which made it clear that the regulator will begin to reduce its balance sheet by $ 95 billion per month from May.
COT analysis.
The latest COT report on the British pound showed minimal changes in the mood of major players. For a whole week, the Non-commercial group opened 5.2 thousand buy contracts and 6.9 thousand sell contracts. Thus, the net position of non-commercial traders decreased by 1.7 thousand. Even for the pound, such changes are insignificant. In general, the "Non-commercial" group still has almost 2.5 times more contracts for sale than for purchase. This means that the mood of professional traders is now "pronounced bearish". Thus, this is another factor that speaks in favor of the continuation of the fall of the British currency. The situation with COT reports for the pound is completely different than for the euro. According to the pound, the mood of the major players changes every couple of months, and sometimes even more often. At this time, the net position of the "Non-commercial" group has already fallen to the levels where the last round of the pound's fall ended (the green line on the first indicator). Thus, we can even assume that in the coming weeks the pound will try to start a new ascent. However, the current fundamental and geopolitical background does not give good reasons to expect strong growth of the British currency. Even taking into account the rate increase by the Bank of England.
Analysis of fundamental events.
There were practically no fundamental events in the UK this week. Two business activity indices and a speech by BA Chairman Andrew Bailey, who, as usual, talked about anything but monetary policy and the economy. Naturally, these events did not provoke any market reaction. And if provoked, it was very difficult to identify it. Business activity indices were also published in the States. And in addition to speeches by representatives of the Fed and the Fed minutes, there were also speeches by Finance Minister Janet Yellen, who said that her country would not participate in any financial summits if a delegation from Russia was present there. Yellen pointed out that this is the position of President Biden and she fully supports it. There were no other important events during the week. But, as we can see, this was enough for the British currency to continue falling against the dollar.
Trading plan for the week of April 11-15:
1) The pound/dollar pair completed a weak correction and resumed falling. Now the key level for the pair remains 1.2830 (50.0% Fibonacci), on overcoming or overcoming which the further long-term prospects of the pound depend. However, given the general mood of the market, COT reports, geopolitical and fundamental backgrounds, it is unlikely that the growth of the British currency should be expected now. Consequently, the pair's sales with a target of 1.2830 remain relevant.
2) The prospects for an upward movement continue to deteriorate and so far there is no reason to buy the pound. This is indicated by the technique since even during the last round of growth, the price failed to update its previous local peak or overcome the critical line. This is evidenced by geopolitics since the pound remains a riskier currency than the dollar. This is indicated by macroeconomics since the economy in the UK is in a worse state than the economy in the United States. There are no grounds for buying a pair on a strong downward trend.
Explanations of the illustrations:
Price levels of support and resistance (resistance /support), Fibonacci levels - target levels when opening purchases or sales. Take Profit levels can be placed near them.
Ichimoku indicators (standard settings), Bollinger Bands (standard settings), MACD (5, 34, 5).
Indicator 1 on the COT charts - the net position size of each category of traders.
Indicator 2 on the COT charts - the net position size for the "Non-commercial" group.
