You are here: Home > articles > Forex > Analysis of the trading week May 1-5 for the GBP/USD pair. COT Report. The British pound is growing again, although there
Analysis of the trading week May 1-5 for the GBP/USD pair. COT Report. The British pound is growing again, although there
May 6, 2023 2:22 pmVideo
Latest News
- Analysis of GBP/USD on April 26th. The pound trades on Friday without changes April 26, 2024
- USD/JPY: Simple trading tips for novice traders on April 26th (US session) April 26, 2024
- GBP/USD: Simple trading tips for novice traders on April 26th (US session) April 26, 2024
- EUR/USD: Simple trading tips for novice traders on April 26th (US session) April 26, 2024
- GBP/USD: trading plan for the US session on April 26th (analysis of morning deals). The pound attempted, but it didn’t go April 26, 2024
- EUR/USD: trading plan for the US session on April 26th (analysis of morning deals). The euro continues to rise April 26, 2024
- Trading Signals for GOLD (XAU/USD) for April 26-29, 2024: buy above $2,324 and sell below $2,352 (21 SMA – 6/8 Murray) April 26, 2024
- Technical Analysis – AUDUSD set to complete best week of the year April 26, 2024
- Will Apple finally drop its AI hint? – Stock Markets April 26, 2024
- Bitcoin slips as markets pare back Fed rate cuts – Crypto News April 26, 2024
- EUR/USD. April 26th. Bulls continue to advance after the GDP report April 26, 2024
- Can Chinese PMIs solidify the economy’s recovery prospects? – Preview April 26, 2024
- Weekly Forex Outlook: 26/04/2024 – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too April 26, 2024
- XM’s Lombok Collaboration: Brightening Futures April 26, 2024
- Week Ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too April 26, 2024
- Market Comment – Yen keeps sinking after Bank of Japan decision April 26, 2024
- Fed faces dilemma amid sticky inflation and slowing economy – Preview April 26, 2024
- USD/JPY: trading tips for beginners for European session on April 26 April 26, 2024
- GBP/USD: trading tips for beginners for European session on April 26 April 26, 2024
- EUR/USD: trading tips for beginners for European session on April 26 April 26, 2024
Long-term perspective.
The currency pair GBP/USD showed another round of illogical growth during the current week. While the European currency had an ECB meeting, which can be considered “dovish” (albeit with a stretch), the Bank of England’s meeting will only occur next week. Thus, the GBP/USD pair only had American statistics at its disposal, which is difficult to call weak or disastrous. Nevertheless, the pound grew most of the week, even on Friday, when the European currency remained in place. Once again, on Friday, the macroeconomic background for both pairs was the same, but the pound appreciated, and the euro currency did not. Thus, we continue to believe that the pound’s movements are illogical.
In the 24-hour timeframe, it can be seen that the pair is crawling upward at a rather slow pace. The market is interested in something other than the abovementioned divergence of the MACD indicator, the overbought indicators on the 4-hour timeframe, and the absence of growth factors. It continues to buy anyway. Therefore, the Bank of England meeting next week will have the same significance for traders as the Fed and ECB meetings this week. The pound may decline locally, but it is unlikely to impact the long-term trend. Therefore, analyzing the fundamental or macroeconomic background now makes little sense, as it does not affect the pair’s movement. Traders interpret any event or report in favor of the pound.
It looks like this: if the US report is weak, the pound is bought; if the US report is strong, nothing happens. Therefore, the pound cannot even correct slightly downward, although it has been growing almost non-stop for two months. This week was associated with hopes for a change in market sentiment to “bearish,” but they once again did not materialize.
COT Analysis.
According to the latest report on the British pound, the “non-commercial” group closed 0.7 thousand buy contracts and opened 4 thousand sell contracts. Thus, the net position of non-commercial traders decreased by 4.7 thousand, but overall it continues to grow. The net position indicator has steadily grown for 8–9 months. Still, the sentiment of major players has remained “bearish” during this time (only now can it be said to be “bullish,” but purely formally). Although the pound sterling is growing against the dollar (from a medium-term perspective), it is very difficult to answer why it does so from a fundamental point of view. We do not exclude the possibility that a sharp decline in the pound will begin soon.
Both major pairs are moving roughly the same way. Still, the net position for the euro is positive and even implies the imminent completion of the upward impulse, while for the pound, it allows for further growth. The British currency has already grown by more than 2,200 points, which is a lot, and continuing to grow without a strong downward correction would be illogical. The “non-commercial” group currently has a total of 58.6 thousand contracts open for sale and 57.6 thousand contracts open for purchase. We remain skeptical about the long-term growth of the British currency and expect it to decline, but market sentiment remains “bullish.”
Fundamental event analysis:
There were virtually no important events in the UK this week. Only the business activity indices in the service, manufacturing, and construction sectors were notable. The first index rose from 52.9 to 55.9, the second fell from 47.9 to 47.8, and the third rose from 50.7 to 51.1. Overall, we consider this statistic neutral, and it certainly was not the cause of another growth of the British currency.
US statistics were not disastrous for the dollar, and the results of the Fed meeting were even more “hawkish” than expected, as the regulator admitted to new rate hikes in the future if inflation slows down in its decline. Moreover, a strong labor market and minimal unemployment again allow the Fed to raise the key rate as much as needed. Furthermore, the Fed benefits from slightly worsening the labor market situation, as high competition for jobs creates wage growth, which drives inflation, which the regulator fights against. Thus, we would bet on another 0.25% rate hike in 2023.
Trading plan for the week of May 8–12:
Explanations for illustrations:
Support and resistance price levels, Fibonacci levels – levels that serve as targets when opening purchases or sales. Take Profit levels can be placed around them.
Ichimoku indicators (standard settings), Bollinger Bands (standard settings), MACD (5, 34, 5).
Indicator 1 on COT charts – the size of the net position of each category of traders.
Indicator 2 on COT charts – the size of the net position for the “non-commercial” group.
The material has been provided by InstaForex Company – www.instaforex.com
Related Posts: