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GBP/USD unexpectedly fell on Monday. The British pound had been in a flat state for four months, and volatility has been particularly low for several months. However, the last two days have been out of the ordinary. The British currency sharply fell on Friday, when there was only the UK retail sales report among relatively important events, and also on Monday, when there was absolutely no news at all. Nevertheless, the pound's recent decline is the most logical movement that we've seen. The pound has been trading very high for a long time considering the fundamental and macroeconomic background. Now it's time to "pay back debts". We believe that the British currency can and should continue to fall in almost any case. Even without news, reports, or central bank officials' speeches.
After another week of the flat phase, the downtrend has resumed. As the market's confidence in a Federal Reserve rate cut diminishes, there is no reason to maintain a high demand for the pound. The Bank of England has plenty of reasons to lower its rate before the Fed decides to do so. After all, inflation in the US continues to rise. The first Fed rate cut may even happen in 2025.
On Monday, we can only highlight two trading signals. First, the pair bounced off the level of 1.2349, and then it surpassed it. Unfortunately, the trading signals were not the best, but traders could still stay in short positions from Friday when the price breached the range of 1.2429-1.2445, marking the end of the weekly flat. It was not the most obvious decision, but the pound's decline on Monday was not something everyone could anticipate in advance. The buy signal did not bring profits, and the sell signal could only bring profit if the trade was manually closed during the US session.
COT reports on the British pound show that the sentiment of commercial traders has frequently changed. The red and blue lines, which represent the net positions of commercial and non-commercial traders, constantly intersect and, in most cases, remain close to the zero mark. According to the latest report on the British pound, the non-commercial group closed 8,200 buy contracts and opened 11,400 short ones. As a result, the net position of non-commercial traders decreased by 19,600 contracts in a week. The fundamental background still does not provide a basis for long-term purchases of the pound sterling, and the currency finally has a real chance to resume the global downward trend. The trend line on the 24-hour TF clearly shows this.
The non-commercial group currently has a total of 71,800 buy contracts and 63,200 sell contracts. The bulls no longer have a significant advantage. Therefore, the pound has a huge potential to fall. We can only hope that inflation in the UK does not accelerate, or that the BoE does not intervene.
On the 1H chart, GBP/USD has left the sideways channel of 1.25-1.28. Now, the pound should continue forming a downtrend, and the pair has the potential to fall by at least 300-400 pips. The fundamental and macroeconomic background continues to support the dollar, as the US economy is much stronger than the UK, and the Fed keeps pushing back its first rate cut. As a result, even the BoE may lower its key rate sooner, and this will weigh on the pound. Since the pair has breached the level of 1.2349, the pound may start a new downward movement on Tuesday, especially if there is a rebound from this level.
As of April 23, we highlight the following important levels: 1.2215, 1.2269, 1.2349, 1.2429-1.2445, 1.2516, 1.2605-1.2620, 1.2691-1.2701, 1.2786, 1.2863, 1.2981-1.2987. The Senkou Span B (1.2556) and Kijun-sen (1.2391) lines can also serve as sources of signals. Don't forget to set a Stop Loss to breakeven if the price has moved in the intended direction by 20 pips. The Ichimoku indicator lines may move during the day, so this should be taken into account when determining trading signals.
On Tuesday, Services and Manufacturing PMI data will be published in the UK and the US. British reports are more important, but the values of these reports must differ from forecasts for the market to react.
Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;
Yellow lines are trend lines, trend channels, and any other technical patterns;
Indicator 1 on the COT charts is the net position size for each category of traders;
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