Figure 2: The GBPUSD on a daily chart
The key levels of support and resistances are as follows:
Resistance 1 is at the level of 1.2480 - 1.2520. Here, there is a monthly Fibo 61.8% of the FH movement that occurred in March. At the same time, 1.2500 is a psychological level.
Resistance 2 is at the level of 1.2620-1.2650. It's a swing at a point J.
Resistance 3 is in the zone 1.2700 - 1.2750.
Support 1 is located in the range of 1.2150 - 1.2230.
Support 2 is in the range around the level of 1.1980 - 1.2000. Here, there is a low border of the hidden gap on the candlestick formed on March 26, 2020.
Support 3 is around the zone 1.1400 - 1.1470.
Since the market as a whole is in a downtrend, it seems more appropriate to look for trades in the short direction near resistance levels, where it is then appropriate to wait for a confirmation. Last time we showed a hypothetical example of short speculation with a volume of 0.01 lot with an entry at a price of 1.25. With a target price of 1.2170, the transaction would bring a profit of CZK 820. The stop loss would be above the last high, which is 1.2653. In monetary terms, the trader would risk CZK 380. The target price has not been reached yet, we'll see if it happens this week.
In addition, we present the overall market sentiment, which according to the COT (Commitment of Traders) report, which is presented every Friday, shows the following data:
|The British pound
|The USD index
Last week, large speculators again reduced the overall position on the British pound. This is the seventh decline in a row and for the first time since January 6, 2020, the overall net position is negative, so bearish sentiment prevails on the pound
. Speculators, on the other hand, strengthened their overall net position on the US dollar for the fifth week in a row, which, despite poor macroeconomic data in the US, confirms that the dollar serves as a strong reserve currency in times of crisis.
What awaits us this week?
Prime Minister Johnson is returning to office. His statements on a possible extension of the Brexit transition period will be closely monitored. The next rounds of negotiations on a trade agreement between the EU and Britain are then tentatively scheduled for May 11 and June 1.
An auction of 10-year bonds will take place in Britain this week on Tuesday. Bond yields have been falling steadily since January, reflecting continuing uncertainty about the future development of the British economy. Consumer confidence and the Nationwide House Price index will be reported on Thursday. PMIs in production will be reported on Friday.
In the USA, data on consumer confidence will be reported on Tuesday. GDP for 1Q 2020 will be reported on Wednesday, and a Fed meeting, where interest rates will be decided, will happen on the same day.
Further development of claims for unemployment benefits will be reported on Thursday. Major companies such as Apple, Facebook, Google, Exxon, Shell and others will report results this week as well. If the data is bad, the US dollar as the world's reserve currency might benefit from that.
In addition, there is a need to continuously monitor the further development of the spread of coronavirus disease and the measures taken in this regard.
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