GBP/USD: plan for the European session on August 26. COT reports. Pound found strength and broke through new weekly highs.

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

Yesterday there were several signals to enter the market, but not all of them were profitable. In my morning forecast, I paid attention to the level of 1.3728 and advised you to make decisions on entering the market. Let's take a look at the 5 minute chart and see what happened. One could clearly see how bulls could try to break through the resistance of 1.3728 and test this level from top to bottom, which creates a signal to open long positions. However, since bulls did not try, they failed to catch on to new local highs, which caused the pair to fall in the second half of the day and resulted in losses. During the US session, the bulls formed a false breakout in the support area of 1.3706, creating a good signal to buy there, which led to a sharp rise by 50 points.

Today we do not have important fundamental statistics for the UK, and also there are no speeches by representatives of the Bank of England. Therefore, we can assume that trading will be based on US fundamental reports and on Federal Reserve Chairman Jerome Powell's speech in Jackson Hole. As for the technical picture of GBP/USD, the bulls are already concentrated on the breakthrough and consolidation above the resistance of 1.3775. Only a test of this level from top to bottom can form a good entry point into long positions in hopes of reaching a new high like 1.3810, with the prospect of updating 1.3841, where I recommend taking profits. The 1.3876 level is still a target, the renewal of which will cancel out all the bears' plans to return the downward trend. However, growth to this level will directly depend on Powell's statements. In the event of a decline in GBP/USD in the first half of the day, the optimal scenario will be long positions from the level of 1.3736, but only if a false breakout is formed there. There are also moving averages that play on the side of the bulls. If the pressure on the pound persists, and the bulls are not active in the support area of 1.3736, the optimal scenario will be long positions from the new low at 1.3697, but also only after the formation of a false breakout. It is possible to buy GBP/USD immediately on a rebound in the area of 1.3662, or even lower - from the level of 1.3634, counting on an upward correction of 15-20 points within the day.

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

The bears' initial task is to protect resistance at 1.3775, which helped the bears maintain the pair's downward trend last week. The optimal scenario for opening short positions will be the formation of a false breakout at this level, which will weaken the pound's position and push the pair to the support of 1.3736, below which the moving averages are, clearly hindering further downward correction. A breakthrough and test of this area from the bottom up will create another entry point into short positions and will push GBP/USD even lower - to 1.3697, and there it is the 1.3662 low, where I recommend taking profits. If the bears are not active around 1.3775, I advise you to postpone short positions until the next major resistance at 1.3810, which may become a new weekly high. I also recommend opening short positions from there only if a false breakout is formed. Selling GBP/USD immediately on a rebound is possible from the local high in the 1.3841 region, counting on a downward correction of 25-30 points within the day.

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I recommend that you familiarize yourself with:

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.

Indicator signals:

Moving averages

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

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 lower border of the indicator in the 1.3700 area will lead to a new wave of decline in the pound. A breakout of the upper border in the area of 1.3780 will lead to an increase in the pair.

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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