Relevance up to 19:00 2020-05-15 UTC–5
The downward movement continued on the hourly chart for the pound/dollar pair on May 14. The day before yesterday, the price reached the support area of 1.2198 – 1.2216, which formed on April 3-7 and, thus, there was a question of overcoming this area. We managed to overcome it, but the bears did not succeed in continuing their downward movement below the support level of 1.2164. It is also worth recalling that 1.2165 is the April 7 low, so there is a chance of a rebound from this level with the start of the upward movement. Despite the certain probability of a reversal around the specified level, before overcoming the downward trend, we do not recommend considering the option with a change in trend as the main one. The downward trend is also supported by the downward channel.
We have two linear regression channels on the 15-minute timeframe, which are also directed downwards and signal a downward trend. The CCI indicator entering the “-200” area was a signal to turn up. However, there was no rebound from the 1.2198-1.2216 area on the hourly timeframe, and the price low at which the CCI signal was formed was overcome with forming a divergence. Thus, the divergence indicated that the signal is false, and the downward movement is still ongoing.
The latest COT report for May 5 shows that the total number of buy and sell transactions among large traders decreased by 1200 per week. Thus, the general mood has not changed and remains “moderately upward” despite the fact that the pound was cheaper in the last few days. However, the pound is getting cheaper in the short term, and COT reports published once a week are more relevant to the long term.
The calendar of macroeconomic events in the UK on May 15 is empty. Thus, traders will only have to observe US statistics, which, admittedly, disappoints as well as in other countries, but does not force market participants to refuse new purchases of the US dollar. Thus, today’s reports on industrial production and retail sales can be ignored. So far, the dollar feels absolutely carefree, especially against the pound sterling, since the British economy is experiencing much more serious problems than the US or the eurozone. And this is not just because of the coronavirus pandemic and the crisis it caused. We have two main options for the development of the event on May 15:
1) The initiative for the pound/dollar pair is still in the hands of the bears, as the price continues to be located inside three descending channels at once and with the support of the downward trend line. Thus, we recommend buying the British pound no earlier than overcoming the trend line on the hourly chart with the first goal of the Kijun-sen line – 1.2314. If the bulls manage to overcome this line (and at the same time exit the descending channel), it is recommended to leave the longs open for the Senkou Span B line – 1.2453. Take Profit will be around 60 points in the first case and 200 points in the second.
2) Sellers will be able to continue moving down if they manage to overcome 1.2165. Then we recommend opening new sales or maintaining existing ones while aiming for 1.2062. In this case, Take Profit will be about 90 points.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
Performed by Paolo Greco,
InstaForex Group © 2007-2020
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