On Wednesday, the downtrend on GBP/USD somewhat slowed. The pound lost just 30 pips. By contrast, it had plunged by 500 pips for the previous 4 days. There were no reasons for a fall in price on Wednesday. Not a single significant event unfolded during the day that could provoke the market's reaction. Hence, the pound extended its bear move amid ongoing geopolitical developments in Eastern Europe, the Bank of England's dovish policy stance, the greenback's reserve currency status, and the UK's greater reliance on Russia and Ukraine than on the US. Even if take the account of these causes, the pound's decrease still looks too sharp. After all, the Bank of England has thrice increased the interest rate, and the UK has quickly found alternatives to the Russian oil and gas. The problem is now that traders have become accustomed to selling the euro and the pound over the past two months and simply cannot stop. In addition, should tensions in Ukraine escalate further, risk assets will continue incurring losses.
In the M5 time frame, the pair moved in the downtrend on Wednesday, retracing up from time to time. In this light, not a single trading signal was made. Given that the price has not been at the current levels for more than 18 months, there have been just a few levels at which trading signals could be formed. The downtrend somewhat slowed on Wednesday, which means we may expect it to end any time soon. The pound simply cannot move just in one direction. Hence, a new short-term uptrend may emerge in the next two days.
Trading plan for Thursday:
In the 30M time frame, the downtrend continues. In recent weeks, the pair has traded mixed. The price has recently formed a descending channel. Should the market enter a correction, the quote will consolidate above the channel. However, it does not mean that the uptrend will extend. After the recent plunge, a bullish correction is impending. On Thursday, the target levels in the 5M time frame are seen at 1.2477, 1.2674, 1.2697, 1.2772, and 1.2860. A stop-loss order should be set at the breakeven point as soon as the price passes 20 pips in the right direction after a trade has been opened. The macroeconomic calendar in the UK contains no important releases on Thursday. Meanwhile, the United States will publish its Q1 GDP results. The data could have an effect on the market if only there is a significant difference between the forecast and actual figures. Traders are unlikely to show any reaction to the weekly jobless claims report.
