GBP/USD: plan for the European session on August 24. COT reports. Pound bulls are quickly regaining control of the market.

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

Yesterday there was only one signal to buy the pound in the first half of the day, which brought a lot of profit. In my morning forecast, I drew attention to the level of 1.3639 and recommended opening long positions from it, subject to the formation of a false breakout. Let's take a look at the 5 minute chart and break down the entry point. The market stopped at the bears' first attempt to push through the 1.3639 area. And although the data on activity in the UK did not turn out so good, the pressure on the pound did not return, which instilled confidence in the bulls and resulted in forming a good entry point into long positions in continuation of the upward correction. In the afternoon, major resistance levels were broken through without any problems, which only led to an increase in demand for the British pound.

Before examining the technical picture of the pound, let's take a look at what happened in the futures market. The Commitment of Traders (COT) reports for August 17 showed that both short and long positions have been reduced. The fact that representatives of the Bank of England (BoE) are in no hurry to talk about changes in monetary policy affects the activity of traders. Last week's data on retail sales and inflation in the UK once again proved that no one will rush to raise interest rates until the end of 2022 - and this is a fairly long time horizon. This put pressure on the pound. But I have repeatedly noted that the lower the pound falls, the more active buyers of risky assets will begin to show themselves, betting on real changes in the BoE's monetary policy in the future. The COT report showed that long non-commercial positions declined from 44,750 to 41,898, while short non-commercials declined from 37,680 to 37,274, indicating a near equilibrium in the balance of power. As a result, the non-commercial net position slightly decreased and reached 4,651, against 7,070 a week earlier. Last week's closing price remained practically unchanged at 1.3840 against 1.3846.

Today we do not expect interesting fundamental data, so the whole emphasis will be on the speech of BoE representatives, who will shed light on their attitude to changes in the bond purchase program in the near future. If the statements show optimism and clear intentions for changes - most likely the pound will continue to grow. Only the breakthrough and reverse test of the 1.3737 level from top to bottom can create a new signal to buy GBP/USD, which will push the pair even higher - to the 1.3782 area. A breakdown of this area will also open a direct path to a large resistance at 1.3810, where I recommend taking profits. The next target will be the high at 1.3841. If the pair is under pressure in the morning, then I advise you not to rush into long positions. An important task for the bulls will be to protect the support at 1.3691, where it will be possible to build the lower border of the new ascending channel. Moving averages, playing on the side of the bulls, also pass there. Forming a false breakout there creates a good entry point into long positions. Otherwise, the optimal buying scenario will be the test of the next support at 1.3661, but even there it is best to wait for a false breakout to form. I advise you to watch buying GBP/USD immediately for a rebound only from a low like 1.3634, counting on an upward correction of 25-30 points within the day.

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

The bears are still struggling to recover from a massive two-day bull rally. Their primary task is to control the new support level at 1.3691. A breakthrough of this area and its reverse test from the bottom up will generate a signal to open short positions with the expectation of a decline to the level of 1.3661. A breakthrough of this range with a similar scenario will form another entry point to short positions with the goal of breaking the bulls' stop orders and a larger fall to the area of the low of 1.3634, where I recommend taking profits. In case the pound grows further in the first half of the day, only the formation of a false breakout in the resistance area of 1.3737 will be a signal to sell GBP/USD. I advise you to open short positions in the pound immediately on a rebound from a larger resistance at 1.3782, or even higher - from a high of 1.3810, counting on the pair's rebound down by 20-25 points within the day.

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I recommend that you familiarize yourself with:

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates further growth of the pair.

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

A breakthrough of the upper border of the indicator in the area of 1.373 will lead to a new wave of growth of the pound. In case the pair falls, support will be provided by the lower border of the indicator in the area of 1.3691.

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.
The material has been provided by InstaForex Company - www.instaforex.com

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