GBP/USD. May 15. The Bank of England can no longer push the pound up
May 15, 2023 3:23 pm
On the hourly chart, the GBP/USD pair resumed its decline on Friday and completed a drop to the corrective level of 100.0% (1.2447). A rebound from this level favored the pound and showed some growth on Monday toward 1.2546. A rebound of the quotes from 1.2546 will again work in favor of the US currency and the resumption of the decline towards 1.2447. Consolidation below the trendline signals a loss of initiative by the bulls. The pound can now continue to fall in the medium term.
Remember that last week, the Bank of England raised the rate for the twelfth time. Still, Andrew Bailey’s rhetoric after the meeting made traders consider the prospects for further tightening by the Monetary Policy Committee. The Bank of England has clarified that it expects strong inflation to decrease in the coming months. If this happens, the 12 rate hikes will not go unnoticed by the economy. If this does not happen, the rate will need to be raised again, but it is already at a restrictive level. The British regulator is not a magician and cannot raise the rate as much as it pleases. Thus, inflation figures in the coming months will be crucial. The pound sterling will react more to them than to meetings and reports.
Certainly, the current decline may end at any moment, like any other movement, but the trend line did not withstand, and the bulls must have new reasons to buy the pound in their arsenal, which are currently absent. In the coming weeks, the pound will gradually slide down, and everything will depend on inflation reports in the UK. There was no informational background on Monday, and the pair showed a pullback upwards. I expect a return to the level of 1.2447 soon.
On the 4-hour chart, the pair completed a drop to 1.2441 and a rebound from it. Thus, a reversal in favor of the pound was made with the potential to resume the upward trend toward the Fibonacci level of 100.0 (1.2674). Consolidation of the pair’s rate below the level of 1.2441 will work in favor of the US currency and the resumption of the fall towards the next corrective level of 127.2% (1.2250). No emerging divergences are observed today with any indicator.
Commitments of Traders (COT) report:
The sentiment of the “non-commercial” trader category became less “bullish” during the last reporting week. The number of long contracts held by speculators decreased by 744 units, while the number of short ones increased by 4030. The overall sentiment of major players remains fully “bullish” (it was “bearish” for a long time), but the number of long and short contracts is now almost the same – 57.5 thousand and 58.5 thousand, respectively. The pound continues to rise predominantly, although very few factors support its buyers. The pound’s prospects remain good, but a decline can be expected soon. The Bank of England’s decision and rate hike will not surprise traders after eleven MPC tightenings.
News calendar for the USA and the UK:
On Monday, the economic events calendar contained a few interesting entries. The impact of the informational background on traders’ sentiment for the remainder of the day will be absent.
GBP/USD forecast and tips for traders:
I advised selling the pound with targets at 1.2546, 1.2500, and 1.2447. All targets have been reached. New sales – with a rebound from the level of 1.2546 or with closure under 1.2447 with the nearest level as the target. Buying the pound was possible with a rebound from the level of 1.2447 on the hourly chart, but the price will not reach 1.2546.
The material has been provided by InstaForex Company – www.instaforex.com
On the hourly chart, the GBP/USD pair resumed its decline on Friday and completed a drop to the corrective level of 100.0% (1.2447). A rebound from this level favored the pound and showed some growth on Monday toward 1.2546. A rebound of the quotes from 1.2546 will again work in favor of the US currency and the resumption of the decline towards 1.2447. Consolidation below the trendline signals a loss of initiative by the bulls. The pound can now continue to fall in the medium term.
Remember that last week, the Bank of England raised the rate for the twelfth time. Still, Andrew Bailey’s rhetoric after the meeting made traders consider the prospects for further tightening by the Monetary Policy Committee. The Bank of England has clarified that it expects strong inflation to decrease in the coming months. If this happens, the 12 rate hikes will not go unnoticed by the economy. If this does not happen, the rate will need to be raised again, but it is already at a restrictive level. The British regulator is not a magician and cannot raise the rate as much as it pleases. Thus, inflation figures in the coming months will be crucial. The pound sterling will react more to them than to meetings and reports.
Certainly, the current decline may end at any moment, like any other movement, but the trend line did not withstand, and the bulls must have new reasons to buy the pound in their arsenal, which are currently absent. In the coming weeks, the pound will gradually slide down, and everything will depend on inflation reports in the UK. There was no informational background on Monday, and the pair showed a pullback upwards. I expect a return to the level of 1.2447 soon.
On the 4-hour chart, the pair completed a drop to 1.2441 and a rebound from it. Thus, a reversal in favor of the pound was made with the potential to resume the upward trend toward the Fibonacci level of 100.0 (1.2674). Consolidation of the pair’s rate below the level of 1.2441 will work in favor of the US currency and the resumption of the fall towards the next corrective level of 127.2% (1.2250). No emerging divergences are observed today with any indicator.
Commitments of Traders (COT) report:
The sentiment of the “non-commercial” trader category became less “bullish” during the last reporting week. The number of long contracts held by speculators decreased by 744 units, while the number of short ones increased by 4030. The overall sentiment of major players remains fully “bullish” (it was “bearish” for a long time), but the number of long and short contracts is now almost the same – 57.5 thousand and 58.5 thousand, respectively. The pound continues to rise predominantly, although very few factors support its buyers. The pound’s prospects remain good, but a decline can be expected soon. The Bank of England’s decision and rate hike will not surprise traders after eleven MPC tightenings.
News calendar for the USA and the UK:
On Monday, the economic events calendar contained a few interesting entries. The impact of the informational background on traders’ sentiment for the remainder of the day will be absent.
GBP/USD forecast and tips for traders:
I advised selling the pound with targets at 1.2546, 1.2500, and 1.2447. All targets have been reached. New sales – with a rebound from the level of 1.2546 or with closure under 1.2447 with the nearest level as the target. Buying the pound was possible with a rebound from the level of 1.2447 on the hourly chart, but the price will not reach 1.2546.
The material has been provided by InstaForex Company – www.instaforex.com
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