Hello, dear traders! On the hourly chart, the GBP/USD pair continued to decline on Thursday after it consolidated below the level of 1.2272 the day before. During Friday, the pair tried to rise. However, by the end of the day it had almost reached the correction level of 523.6% at 1.2146 again. Currently, it is difficult for the pound to find the level to start growing. Bear traders seize every chance to open new sales. Moreover, they ignore the positive news for the pound. The most shocking fact is that traders are passive regarding the Bank of England's monetary policy and unwilling to pay attention to statistics. Let's go into details. The Bank of England raised the interest rate four times up to 1%. The Fed raised the rate twice and also increased it up to 1%. The current situation seems to be identical, and the near future is uncertain. However, traders were selling off the pound when they heard about the British central bank's fourth rate hike. Besides, at the same time they were buying the dollar as the Fed raised the interest rate. There is no logic in their actions.
Let's continue our analysis. The British GDP report was weak in the first quarter with the index of 0.8%, though traders were expecting it to be 1.0%. Notably, US GDP fell by 1.4% in the first quarter. That is, logic suggests that the pound should have grown slightly which can be seen on the chart. On the contrary, it keeps dropping. The pound has fallen nearly by 1100 points since March 23. Moreover, the largest bullish candlestick was 110 points. There are no two bullish candlesticks in a row on the daily chart during this period. That is, traders do not buy the pound at all. However, as analyzed above, sterling had at least two legitimate reasons for rising. Therefore, I draw the conclusion that the bull traders are waiting for the bears to maximize profits and start to leave the market. Then the new bullish trend is likely to start. Besides, it can result in the British pound's substantial rise. In this case, traders will ignore bearish factors for the British pound.
On the 4-hour chart, the GBP/USD pair has consolidated below the correction level of 127.2% at 1.2250. Therefore, the decline may continue towards the next level of 1.1980. At the same time, formation of a new bullish divergence in the MACD indicator may lead to the pair's slight growth. However, the previous bullish divergence resulted in the British pound's rise of 130 pips. Moreover, the pair should consolidate at least above 1.2250 to start growing.
COT report:
The sentiment of the non-commercial traders has changed dramatically again over the past week. The number of long contracts held by speculators fell by 6,900 units, while the number of short contracts decreased by 2,708 units. Thus, the general sentiment of major players became even more bearish. The ratio between the number of long and short contracts held by speculators corresponds to the current market situation. There are 3 times more contracts for longs than shorts (10,7349 against 3,536). The major players continue to sell off the British pound. Therefore, I expect that the pound might continue falling during the next weeks. Moreover, such a large gap between the number of long and short contracts may indicate the rapid change in the market trend. The British pound could end its long decline this week.
US and UK economic news calendar:
US - University of Michigan Consumer Sentiment Index (2 pm UTC).
On Friday, the aggregate report was released in the UK and US. It was not a key report. Therefore, the news background will not influence traders' sentiment significantly during the day.
GBP/USD outlook and recommendations for traders:
I recommended selling the pound with a target of 1.2146 at a close below the level of 1.2272. Currently, these trades can be held. New sales are possible at a close below 1.2146 with a target of 1.2000. I do not recommend buying the pound now as the downtrend has resumed.
