GBP/USD: plan for the European session on April 13. COT reports. The pound is stuck in another horizontal channel

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Yesterday, several signals were formed to enter the market. Let's look at the 5-minute chart and figure out the entry points. In my morning forecast, I paid attention to the level of 1.3034 and advised you to make decisions on entering the market from it. Not quite unambiguous data on the UK economy led to a fall in the pound in the first half of the day, although the unemployment rate decreased.

The growth before the labor market report in the area of 1.3034 resulted in forming a false breakout and a signal to open short positions, which then resulted in a sell-off of the pound by more than 40 points. However, we did not reach the nearest support of 1.2990. In the afternoon, the pair returned around 1.3034. A breakthrough and reverse test of this level from top to bottom took place immediately after the release of inflation data in the US, which resulted in a buy signal. Despite the bullish sentiment, it was not possible to see a strong growth of GBP/USD. After jumping by 15 points, the pressure on the pound returned, and trading moved below 1.3034. There were no other signals. 

To open long positions on GBP/USD, you need: 

The pound fell in the morning following the news that average earnings in the UK, excluding bonuses, increased by only 4.1% compared to last year, but adjusted for inflation over the same period, average earnings decreased by 1.3%. It is obvious that the rapid rise in the cost of living deprives Brits of the advantages of a strong labor market and creates new difficulties. Unemployment has fallen to 3.8% in three months. Despite this, the bulls tried to regain control of the market, but the US inflation data again ruined their plans. According to the US Department of Labor, the consumer price index rose to 8.5% compared to last year in March, after jumping to 7.9% in February. Compared to last month, the CPI increased by 1.2%, which was the largest increase since 2005. After the pound returned to monthly lows in the area of 1.2988, bulls had much more problems. Now they need to think about how to protect this range, since apparently the bears are not going anywhere. Only a false breakout at 1.2988 could result in creating the first buy signal, which can return GBP/USD to the area of the new middle of the 1.3022 horizontal channel. There are moving averages that play on the bears' side. If this scenario is implemented, the breakdown and the 1.3022 test from top to bottom will create another entry point for opening long positions, which will strengthen the bulls and open the way to growth in the 1.3052 area. However, the upward movement from this level will depend on the UK data. A sharp jump up in the consumer price index and the retail price index in the UK will lead to an increase in the area of the more distant target of 1.3079, where I recommend taking profits. In case GBP/USD falls during the European session and traders are not active at 1.2988, it is best to postpone long positions to a new low of 1.2950.

I advise you to enter the market there only if there is a false breakout. You can buy GBP/USD immediately for a rebound from 1.2911, or even lower – in the area of 1.2856 and only for the purpose of correction of 30-35 points within the day. 

To open short positions on GBP/USD, you need: 

Yesterday's weak data on the UK economy and high inflation in the US continued to put pressure on the pair. A lot will depend on whether bears will show themselves today around 1.3022, or not. The primary task now is to protect this level, just above which the moving averages are playing on the bears' side. Forming a false breakout together with weak inflation in the UK will provide an entry point to short positions in order to strengthen the bear market and pull the pair to the area of 1.2988. A breakdown and a reverse test of 1.2988 will lead to the demolition of a number of bulls' stop orders and a sell signal, which will dump GBP/USD to the lows: 1.2950 and 1.2911.A more distant target will be the 1.2856 area, where I recommend taking profits. If the pair grows during the European session and bears are weak at 1.3022, this will not create any special problems for them. This is just the middle of the horizontal channel – the medium-term trend remains downward. However, in this scenario, it is best to postpone short positions until 1.3052. I also advise you to open short positions there only in case of a false breakout. You can sell GBP/USD immediately for a rebound from the high of 1.3079, or even higher – from 1.3104, counting on the pair's rebound down by 30-35 points within the day. 

I recommend for review: 

The Commitment of Traders (COT) report for April 5 logged an increase in both short and long positions. However, there were more of the first ones, which once again led to an increase in the negative delta. Fears related to the state of the UK economy and the risks of high inflation, which is sure to further exacerbate the ongoing crisis of British households, have been confirmed. Recent GDP data indicated a very sharp slowdown in economic growth. Experts note that the situation will only worsen, as inflation risks are now quite difficult to assess, but it is clear for sure that the consumer price index will continue to grow in the coming months. At the same time, the soft position of the governor of the Bank of England will only push prices up. The only thing the bulls can count on now is the positive results of the negotiations between the representatives of Russia and Ukraine and progress towards a settlement of the conflict. 

Do not forget about the aggressive policy of the Federal Reserve, which is becoming more hawkish every day. In the US, there are no such problems with the economy as in the UK, so there the Fed can raise rates more actively, which it is going to do during the May meeting – another signal towards selling the pound against the US dollar. The COT report for April 5 indicated that long non-commercial positions rose from the level of 30,624 to the level of 35,873, while short non-commercial positions jumped from the level of 70,694 to the level of 77,631. This led to an increase in the negative value of the non-commercial net position from -40,070 to -41,758. The weekly closing price rose to 1.3112 against 1.3099. 

Indicator signals: Trading is conducted below the 30 and 50 moving averages, which indicates a further fall in the pound. Moving averages Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart. Bollinger Bands In case of growth, the upper limit of the indicator around 1.3040 will act as resistance. In case the pound falls, the lower limit of the indicator in the area of 1.2980 will provide support. 

Description of indicators 

Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart. Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart. 

MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9 Bollinger Bands (Bollinger Bands). Period 20 Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements. Long non-commercial positions represent the total long open position of non-commercial traders. Short non-commercial positions represent the total short open position of non-commercial traders. Total non-commercial net position is the difference between short and long positions of non-commercial traders.