GBP/USD: Plan for European session on July 18, 2023. Commitment of Traders (COT) report (analysis of yesterday’s trades).
July 18, 2023 9:23 am
Yesterday, several entry signals were formed in the market. Let us take a look at the 5-minute chart and analyze what happened. In my morning forecast, I highlighted the level of 1.3081 and recommended making trading decisions with this level in mind. The decline and the false breakout of 1.3081 provided an excellent entry point for long positions, resulting in a 25-pip rally before momentum fizzled out. During the second half of the day, a similar defense of this range signaled further buying opportunities. However, there was a lack of upward momentum, leading to losses.
When to open long positions on GBP/USD:
Before diving into the technical outlook for the pound, let’s review the futures market. The latest Commitment of Traders (COT) report on July 11 revealed an increase in both long and short positions. However, the number of buyers exceeded sellers by a factor of two, confirming the ongoing bullish sentiment that has persisted throughout this month. Pound sterling bulls certainly have the upper hand and can continue to act more aggressively. On one hand, the Federal Reserve is content with the rapid decline in inflation, which reduces the likelihood of further rate hikes. On the other hand, the Bank of England, despite economic challenges, will maintain a high-interest-rate policy due to serious inflation issues affecting household living standards. The monetary policy divergence will strengthen the pound sterling and weaken the US dollar. Buying the pound on dips remains the most optimal strategy. According to the latest COT report, it is stated non-commercial long positions increased by 15,206 to 111,667 from 96,461, while non-commercial short positions rose by 7,408 to 53,604 from 46,196. This led to another surge in the non-commercial net position to 58,063, compared to 50,265 a week earlier. The weekly price increased to 1.2932 from 1.2698.
With no significant UK data on the calendar today, buyers are likely to dominate the market, although the upside potential in the first half of the day may be limited. As I mentioned above, I prefer to act on the decline near the nearest support at 1.3048, which was formed yesterday. This will provide an excellent entry point, with the target being the resistance at 1.3109, slightly below the key moving averages that favor sellers. Therefore, a breakout and a downward retest of this range are very important today, as they will generate an additional buy signal, reinforcing the pound’s strength and potentially driving it to a new yearly high around 1.3166. Failure to surpass this level would make it challenging for GBP/USD bulls to sustain further upside movement. If the pair breaks above this range, we can expect a surge towards 1.3209, where I will take profits. If GBP/USD falls and bulls are idle at 1.3048, the pound sterling’s situation will deteriorate significantly, and the pressure on the pair will increase. If that happens, I will postpone opening long positions until 1.2999, and do so only on a false breakout. Long positions on GBP/USD can be opened immediately on a rebound from 1.2947, targeting an intraday correction of 30-35 pips.
When to open short positions on GBP/USD:
The bears did everything they could yesterday and currently maintain control over the downward correction. As long as trading remains below 1.3109, further downside potential for the pair remains. Therefore, it is crucial to prevent GBP/USD from breaking above this range. Only a false breakout of 1.3109 would provide a sell signal, targeting a decline towards the support level at 1.3048, established based on yesterday’s price action. A breakout and an upward retest will provide an entry point for short position targeting 1.2999. The most distant target will be the low at 1.2947, where I will take profits. If GBP/USD rises and bears are idle at 1.3109, the situation will return under the control of bullish traders. In such a case, only a false breakout of the next resistance level of 1.3166 will provide an entry point for short positions, anticipating a downward movement of the pound. If there is no activity there as well, I recommend selling GBP/USD if it bounces off 1.3209, expecting a downward rebound of 30-35 pips intraday.
Indicator signals:
Moving Averages
Trading is carried out below the 30-day and 50-day moving averages, indicating a higher possibility of a downward correction for GBP/USD.
Note: The author considers the period and prices of the moving averages on the 1-hour chart (H1), which differ from the standard definition of classical daily moving averages on the daily chart (D1).
Bollinger Bands
If the pair increases, the upper boundary of the indicator around 1.3109 will act as resistance. If GBP/USD declines, the lower boundary of the indicator around 1.3050 will provide support.
Description of indicators
Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart. Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked 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 the short and long positions of non-commercial traders.The material has been provided by InstaForex Company – www.instaforex.com
Yesterday, several entry signals were formed in the market. Let us take a look at the 5-minute chart and analyze what happened. In my morning forecast, I highlighted the level of 1.3081 and recommended making trading decisions with this level in mind. The decline and the false breakout of 1.3081 provided an excellent entry point for long positions, resulting in a 25-pip rally before momentum fizzled out. During the second half of the day, a similar defense of this range signaled further buying opportunities. However, there was a lack of upward momentum, leading to losses.
When to open long positions on GBP/USD:
Before diving into the technical outlook for the pound, let’s review the futures market. The latest Commitment of Traders (COT) report on July 11 revealed an increase in both long and short positions. However, the number of buyers exceeded sellers by a factor of two, confirming the ongoing bullish sentiment that has persisted throughout this month. Pound sterling bulls certainly have the upper hand and can continue to act more aggressively. On one hand, the Federal Reserve is content with the rapid decline in inflation, which reduces the likelihood of further rate hikes. On the other hand, the Bank of England, despite economic challenges, will maintain a high-interest-rate policy due to serious inflation issues affecting household living standards. The monetary policy divergence will strengthen the pound sterling and weaken the US dollar. Buying the pound on dips remains the most optimal strategy. According to the latest COT report, it is stated non-commercial long positions increased by 15,206 to 111,667 from 96,461, while non-commercial short positions rose by 7,408 to 53,604 from 46,196. This led to another surge in the non-commercial net position to 58,063, compared to 50,265 a week earlier. The weekly price increased to 1.2932 from 1.2698.
With no significant UK data on the calendar today, buyers are likely to dominate the market, although the upside potential in the first half of the day may be limited. As I mentioned above, I prefer to act on the decline near the nearest support at 1.3048, which was formed yesterday. This will provide an excellent entry point, with the target being the resistance at 1.3109, slightly below the key moving averages that favor sellers. Therefore, a breakout and a downward retest of this range are very important today, as they will generate an additional buy signal, reinforcing the pound’s strength and potentially driving it to a new yearly high around 1.3166. Failure to surpass this level would make it challenging for GBP/USD bulls to sustain further upside movement. If the pair breaks above this range, we can expect a surge towards 1.3209, where I will take profits. If GBP/USD falls and bulls are idle at 1.3048, the pound sterling’s situation will deteriorate significantly, and the pressure on the pair will increase. If that happens, I will postpone opening long positions until 1.2999, and do so only on a false breakout. Long positions on GBP/USD can be opened immediately on a rebound from 1.2947, targeting an intraday correction of 30-35 pips.
When to open short positions on GBP/USD:
The bears did everything they could yesterday and currently maintain control over the downward correction. As long as trading remains below 1.3109, further downside potential for the pair remains. Therefore, it is crucial to prevent GBP/USD from breaking above this range. Only a false breakout of 1.3109 would provide a sell signal, targeting a decline towards the support level at 1.3048, established based on yesterday’s price action. A breakout and an upward retest will provide an entry point for short position targeting 1.2999. The most distant target will be the low at 1.2947, where I will take profits. If GBP/USD rises and bears are idle at 1.3109, the situation will return under the control of bullish traders. In such a case, only a false breakout of the next resistance level of 1.3166 will provide an entry point for short positions, anticipating a downward movement of the pound. If there is no activity there as well, I recommend selling GBP/USD if it bounces off 1.3209, expecting a downward rebound of 30-35 pips intraday.
Indicator signals:
Moving Averages
Trading is carried out below the 30-day and 50-day moving averages, indicating a higher possibility of a downward correction for GBP/USD.
Note: The author considers the period and prices of the moving averages on the 1-hour chart (H1), which differ from the standard definition of classical daily moving averages on the daily chart (D1).
Bollinger Bands
If the pair increases, the upper boundary of the indicator around 1.3109 will act as resistance. If GBP/USD declines, the lower boundary of the indicator around 1.3050 will provide support.
Description of indicators
Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart. Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked 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 the short and long positions of non-commercial traders.The material has been provided by InstaForex Company – www.instaforex.com
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