GBP/USD. May 14. COT report: “bearish” mood among major players is growing. Traders need to overcome the level of 1.2184,

By | May 14, 2020
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GBP/USD. May 14. COT report: "bearish" mood among major players is growing. Traders need to overcome the level of 1

GBP/USD – 1H.

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Hello, traders! According to the hourly chart, the GBP/USD pair rebounded from the upper border of the new downward trend corridor, turned in favor of the US dollar, and resumed falling. Thus, the mood of most traders remains “bearish” until the pair’s quotes are fixed above the corridor. We cannot say that the dollar received support due to the current events in the US. Donald Trump seems to be seriously intent on starting a new trade war with China, and he is supported by several senators who have approved a new bill “on responsibility for COVID-2019”, which, if passed, will allow the US President to impose sanctions against China, ban Chinese officials from entering America or restrict access of Chinese companies to the US stock market. The law has not yet been passed, but nevertheless. Also yesterday, Jerome Powell, President of the Federal Reserve, said that the Central Bank is not yet considering the possibility of applying negative rates and does not consider them an effective tool in fighting the economic crisis.

GBP/USD – 4H.

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On the 4-hour chart, the GBP/USD pair continued falling in the direction of the lower line of the sideways trend corridor. The pair’s rebound from this line will allow traders to expect a reversal in favor of the British currency and some growth in the direction of the corrective level of 61.8% (1.2516) and the upper line of the side corridor. Closing the pair’s exchange rate under the corridor will increase the chances of a further fall in the quotes in the direction of the Fibo levels of 38.2% and 23.6%. No indicator has any pending divergences today.

GBP/USD – Daily.

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On the daily chart, the pair’s quotes fell to the corrective level of 38.2% (1.2215). The rebound from this level in combination with the rebound from the lower line of the corridor on the 4-hour chart allows traders to expect a reversal in favor of the British currency and some growth in the direction of 1.2463.

GBP/USD – Weekly.

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On the weekly chart, the pound/dollar pair performed a false breakdown of the lower trend line. Thus, until the pair’s quotes are fixed under this line, there is a high probability of growth in the direction of the top two trend lines, but in the long term.

Overview of fundamentals:

On Wednesday, the UK released reports on GDP and industrial production in March. GDP decreased by 5.8% m/m in March and 2.0% compared to the previous quarter. Industrial production increased by 8.2% y/y and 4.2% m/m. The most interesting thing is that traders were waiting for even worse values. Thus, the actual values can still be called positive. But this “positivity” did not help the British. For most of the past day, its rate has been falling.

News calendar for the US and UK:

UK – Bank of England Governor Andrew Bailey will deliver a speech (12:30 GMT).

US – number of initial and repeated applications for unemployment benefits (14:30 GMT).

On May 14, the UK will host a speech by the Governor of the Bank of England, Andrew Bailey, which will definitely arouse the interest of traders, like yesterday’s speech by Jerome Powell. I also recommend that you pay attention to the report on applications for benefits in America.

COT (Commitments of Traders) report:

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The latest COT report showed that professional market players were getting rid of long contracts (-3,252) and increasing short (+2,054) in the week of May 5. However, in general, all changes in the number of contracts in all groups of traders are minimal, no more than 4 thousand. Major players continue to dislike the pound with their attention. The “Commercial” group was mainly engaged in reducing short contracts, and in general, during the reporting week, both types of contracts lost only 600 units, that is, almost equal and at the same time the minimum number. The overall advantage remains with buyers, but it is also feeble. The total number of contracts in the hands of professional traders does not exceed 100,000, which is very small. However, in recent days, the British pound has clearly headed down, thus, the next COT report may show a strengthening of the “bearish” mood among major players.

Forecast for GBP/USD and recommendations to traders:

I recommend selling the pound in the current conditions only after closing at 1.2184 (the lower line of the corridor) with the goals of 1.2095 and 1.1834. I recommend buying the pound in case of a rebound from the lower line of the corridor or in case of closing above the descending corridor on the hourly chart.

Terms:

“Non-commercial” – major market players: banks, hedge funds, investment funds, private, large investors.

“Commercial” – commercial enterprises, firms, banks, corporations, companies that buy currency, not for speculative profit, but to ensure current activities or export-import operations.

“Non-reportable positions” – small traders who do not have a significant impact on the price.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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