A Break in Neckline Is Expected

Central Bank

Forex

Summary:

The recent underperformance of UK economic data has elevated the likelihood of a rate cut by the Bank of England at its May 8 Monetary Policy Committee meeting, potentially exerting downward pressure on the British pound.

SELL GBPUSD

Close Time

CLOSED

1.33557

Entry Price

1.27600

1.34500

1.33214 -0.00098 -0.07%

94.3

Pips

Loss

1.27600

1.34510

Exit Price

1.33557

Entry Price

1.34500

Fundamentals

The UK economy is currently facing a complex landscape of challenges. Recent data indicates a continued contraction in the manufacturing PMI, with the April final reading at 45.4. Export orders have reached an eight-month low, directly reflecting the impact of the Trump administration's 25% tariffs on automobiles. This policy has significantly affected the automotive sector, which accounts for 20% of UK exports to the US, impacting companies such as Jaguar Land Rover, which have been compelled to suspend shipments to assess cost implications. Concurrently, while retail sales saw a reduced decline in April, the outlook for May has deteriorated to -33%, the lowest in a year, highlighting weak consumer confidence and the fragility of the economic recovery.

The Bank of England's (BOE) monetary policy stance further exacerbates the pound's challenges. Market consensus anticipates a 25 basis point interest rate cut to 4.25% on May 8, potentially signaling accelerated easing to counteract the tariff effects. The removal of "gradual rate cuts" from the policy statement could place additional pressure on the pound.

In contrast, the U.S. economy demonstrates relative resilience. April's non-farm payrolls exceeded expectations, with 177,000 jobs added, and the unemployment rate remained stable at 4.1%. Although the services PMI declined, it remains in expansionary territory at 50.8. The elevated price payments index at 69.8 supports the Federal Reserve's hawkish stance, with the market's expectation of a June rate cut decreasing to 37%. Furthermore, historical seasonal patterns indicate a 72% probability of the GBPUSD decline in May, with current market sentiment aligning with historical trends.

Technical Analysis

In the 4H timeframe, the GBPUSD is currently experiencing a period of consolidation within a high-level trading range. However, the declining peaks suggest a weakening of bullish momentum. Meanwhile, a head and shoulders top pattern is emerging, which increases the likelihood of a subsequent decline in the GBPUSD.

Currently, if the GBPUSD breaks the neckline of the head and shoulders top pattern at 1.3250, the potential for further downward movement will be realized. The initial downside target is projected to test the previous low at 1.2708.

It is recommended to go short at the highs.

Trading Recommendations

Trading Direction: Sell

Entry Price: 1.3350

Target Price: 1.2760

Stop Loss: 1.3450

Valid Until: May 21, 2025 23:00:00

Support: 1.3250, 1.2708

Resistance: 1.3402, 1.3443

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Adam

Commodity

Summary:

On May 7, 2025, WTI Crude Oil price was trading around $59.60/barrel after increasing 2.72% to $59.58 on May 6, with downward pressure coming from forecasts of a 2.4 million barrel increase in US crude oil inventories and the decision of OPEC+ to continue boosting production...

SELL WTI

Close Time

CLOSED

1.160

Entry Price

58.000

61.000

1.850 +0.050 +2.78%

5684.0

Pips

Loss

58.000

1.180

Exit Price

1.160

Entry Price

61.000

Overview

On the morning of May 7, WTI opened at $60.10/barrel and quickly fell to $59.60 when news of a sharp increase in US inventories emerged. The EIA report showed that crude oil inventories were expected to increase, fueling selling pressure at NYMEX. OPEC+ has just announced plans to increase production by 411,000 barrels/day in June, creating a global oversupply. Although some US shale companies have cut rigs, production volume is still high, only decreasing from 13.2 to 12.9 million barrels/day, not enough to offset the excess supply.

Market psychology

Risk sentiment increased as signs of weakening demand emerged in Europe and China, while investors reacted negatively to April manufacturing PMI reports that showed slower growth in both markets. The VIX fear index rose, reflecting the flight of money from risky assets, including crude oil. EIA and Macquarie forecasts both revised their oil price outlooks lower for the second half of the year, with WTI now forecast to fall to $56 a barrel if demand remains weak.

Technical analysis

WTI under downward pressure from forecast of 2.4 million barrel increase in US crude oil inventories and OPEC+ decision to continue boosting production_1

On the M15 chart, Bollinger bands (20,0,2) are widening sharply to the downside, indicating increased volatility and increasing selling pressure.. Ichimoku confirms the bearish signal when Tenkan-sen crosses below Kijun-sen and price breaks below Kumo cloud. In particular, Stochastic (5,3,3) is in the overbought zone and shows signs of negative divergence, implying that the downtrend may continue to be stronger when the indicator exits this zone. Trading volume of recent red candles increased slightly, strengthening short-term selling pressure..