GBP/USD. Overview for May 4th. The pound continues the “swing” with an upward bias
May 4, 2023 7:22 am
The GBP/USD currency pair traded with moderate gains on Wednesday before announcing the results of the FOMC meeting. After the announcement, we are still considering the movements and the meeting outcomes. In general, it is unimportant in which direction the pair will move after the meeting, as this will be an impulsive market reaction that deviates from the overall technical picture. On strong news, the price often breaks through important levels but returns to its original position. Therefore, conclusions should be drawn at least 18 hours after such an important event as a central bank meeting.
Overall, the pound/dollar pair maintains an upward trend but, at the same time, shows no desire to correct even a little. Everyone has long been used to this state of affairs. The pound has been growing almost non-stop for two months. Recently, we have observed something between an upward movement and a flat. For example, since April 6, the moving average line has risen by only 70 points. Thus, over the past month, the pair has grown on average by 70 points, which is very little and cannot be considered a strong upward movement. The British currency has had no growth factors for a long time. Market participants are desperate to maintain the upward trend but need help to buy on the flat ground constantly. So, no matter what the results of the FOMC or Bank of England meeting (next week), the pair has only one way – down.
Of course, the pound sterling may continue to grow for some time. It can even grow for a long time, but it must be admitted that the fundamental background does not influence market sentiment, and traders trade as they like, not based on news, reports, and events. The CCI indicator twice entered the overbought area, the pair has recently fallen below the moving average four times, and the decline did not begin in all these cases.
Business activity is growing in the US, and the ADP report is also optimistic. In addition to the FOMC meeting, several important reports were published in the US yesterday. It is worth starting with the ADP report, an analog of nonfarm payrolls, just as the ISM index is an analog of the S&P index. In April, the number of new jobs in the private sector increased by 296 thousand, with forecasts ranging between 140 and 148 thousand. Thus, the forecast was exceeded exactly twice, but the market hardly reacted to this positive report. This is unsurprising because the market always focuses on nonfarm while ADP is ignored. Moreover, the readings of these two reports rarely coincide. The ADP report may be strong, while nonfarm may be weak. Therefore, no conclusions should be drawn based on the ADP report.
Later on Wednesday, the ISM business activity index for the service sector was also published, which grew in April to 51.9 points, exceeding the forecast values. The US currency should have grown significantly, but the market ignored this report. Perhaps, just like that (as it has been used to doing with any reports in favor of the dollar for the last 2 months), or due to the proximity of the FOMC meeting. In the latter case, this is what we were talking about at the beginning of the article – during the announcement of the meeting results, and the market trades nervously and impulsively, so there is no need to talk about the logic of reactions or movements. We have already mentioned earlier that the American economy, although slowing down, still feels much better than the European or British ones, with a higher key rate. And this is another factor why the dollar should finally start to grow. But for now, the market sentiment remains “bullish,” and nothing can be done about it.
The average GBP/USD pair volatility for the last five trading days is 94 points. For the pound/dollar pair, this value is “average.” Thus, on Thursday, May 4, we expect movement within the channel limited by levels 1.2462 and 1.2650. A reversal of the Heiken Ashi indicator backdown will signal a new round of downward movement
.
Nearest support levels:
S1 – 1.2543
S2 – 1.2512
S3 – 1.2482
Nearest resistance levels:
R1 – 1.2573
R2 – 1.2604
R3 – 1.2634
Trading recommendations:
The GBP/USD pair in the 4-hour timeframe is trying again to continue moving upwards. The sideways movement may resume, as we have observed more of a flat than a trend in recent weeks. Trading can again be done only on reversals of the Heiken Ashi indicator or lower timeframes.
Explanations for illustrations:
Linear regression channels – help determine the current trend. If both are directed in one direction, the trend is strong.
Moving average line (settings 20.0, smoothed) – determines the short-term tendency and direction in which trading should be conducted now.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the probable price channel in which the pair will spend the next day, based on current volatility indicators.
CCI indicator – its entry into the oversold area (below -250) or the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.
The material has been provided by InstaForex Company – www.instaforex.com
The GBP/USD currency pair traded with moderate gains on Wednesday before announcing the results of the FOMC meeting. After the announcement, we are still considering the movements and the meeting outcomes. In general, it is unimportant in which direction the pair will move after the meeting, as this will be an impulsive market reaction that deviates from the overall technical picture. On strong news, the price often breaks through important levels but returns to its original position. Therefore, conclusions should be drawn at least 18 hours after such an important event as a central bank meeting.
Overall, the pound/dollar pair maintains an upward trend but, at the same time, shows no desire to correct even a little. Everyone has long been used to this state of affairs. The pound has been growing almost non-stop for two months. Recently, we have observed something between an upward movement and a flat. For example, since April 6, the moving average line has risen by only 70 points. Thus, over the past month, the pair has grown on average by 70 points, which is very little and cannot be considered a strong upward movement. The British currency has had no growth factors for a long time. Market participants are desperate to maintain the upward trend but need help to buy on the flat ground constantly. So, no matter what the results of the FOMC or Bank of England meeting (next week), the pair has only one way – down.
Of course, the pound sterling may continue to grow for some time. It can even grow for a long time, but it must be admitted that the fundamental background does not influence market sentiment, and traders trade as they like, not based on news, reports, and events. The CCI indicator twice entered the overbought area, the pair has recently fallen below the moving average four times, and the decline did not begin in all these cases.
Business activity is growing in the US, and the ADP report is also optimistic. In addition to the FOMC meeting, several important reports were published in the US yesterday. It is worth starting with the ADP report, an analog of nonfarm payrolls, just as the ISM index is an analog of the S&P index. In April, the number of new jobs in the private sector increased by 296 thousand, with forecasts ranging between 140 and 148 thousand. Thus, the forecast was exceeded exactly twice, but the market hardly reacted to this positive report. This is unsurprising because the market always focuses on nonfarm while ADP is ignored. Moreover, the readings of these two reports rarely coincide. The ADP report may be strong, while nonfarm may be weak. Therefore, no conclusions should be drawn based on the ADP report.
Later on Wednesday, the ISM business activity index for the service sector was also published, which grew in April to 51.9 points, exceeding the forecast values. The US currency should have grown significantly, but the market ignored this report. Perhaps, just like that (as it has been used to doing with any reports in favor of the dollar for the last 2 months), or due to the proximity of the FOMC meeting. In the latter case, this is what we were talking about at the beginning of the article – during the announcement of the meeting results, and the market trades nervously and impulsively, so there is no need to talk about the logic of reactions or movements. We have already mentioned earlier that the American economy, although slowing down, still feels much better than the European or British ones, with a higher key rate. And this is another factor why the dollar should finally start to grow. But for now, the market sentiment remains “bullish,” and nothing can be done about it.
The average GBP/USD pair volatility for the last five trading days is 94 points. For the pound/dollar pair, this value is “average.” Thus, on Thursday, May 4, we expect movement within the channel limited by levels 1.2462 and 1.2650. A reversal of the Heiken Ashi indicator backdown will signal a new round of downward movement
.
Nearest support levels:
S1 – 1.2543
S2 – 1.2512
S3 – 1.2482
Nearest resistance levels:
R1 – 1.2573
R2 – 1.2604
R3 – 1.2634
Trading recommendations:
The GBP/USD pair in the 4-hour timeframe is trying again to continue moving upwards. The sideways movement may resume, as we have observed more of a flat than a trend in recent weeks. Trading can again be done only on reversals of the Heiken Ashi indicator or lower timeframes.
Explanations for illustrations:
Linear regression channels – help determine the current trend. If both are directed in one direction, the trend is strong.
Moving average line (settings 20.0, smoothed) – determines the short-term tendency and direction in which trading should be conducted now.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the probable price channel in which the pair will spend the next day, based on current volatility indicators.
CCI indicator – its entry into the oversold area (below -250) or the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.
The material has been provided by InstaForex Company – www.instaforex.com
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