GBP/USD: trading plan for European session on April 3. COT report. The pound is down quite a lot
April 3, 2023 9:23 am
Several good entry points last Friday. Now, let’s look at the 5-minute chart and figure out what actually happened. Earlier, I asked you to pay attention to the level of 1.2365 to decide when to enter the market. A buy signal was made after a decline in price and a false breakout closer to the middle of the day. The growth was about 30 pips, but then the bears were very active around 1.2393. A false breakout at this level during the US session gave a sell signal, and the pair fell by more than 40 pips.
Conditions for opening long positions on GBP/USD:
In the European session, we expect to receive a disappointing report on the UK manufacturing PMI, which may return pressure on the pair. For this reason, I will not rush into long positions. The trading plan will be to buy GBP/USD after a decline and false breakout around the nearest support at 1.2242. This will give a buy signal for the pair to rise to 1.2303, formed on the basis of today’s results and for which I expect a rather active opposition. If the pair consolidates there and undertakes a downward test, GBP/USD could reach a new monthly high of 1.2347. At this level, the bulls will again face serious problems. Following a breakout of this level, the pair could touch 1.2393, where I will take profit. If the bulls fail and miss 1.2242, we can expect a large correction. In this case, I would advise you not to rush into purchases and open long positions only near the support level of 1.2192. You could buy GBP/USD at a bounce from a low of 1.2115, keeping in mind an upward intraday correction of 30-35 pips.
Conditions for opening short positions on GBP/USD:
The bears need to be active around 1.2303, and if they miss, the bulls will be in control again. Only a false breakout there could provide a sell signal and that will bring down GBP/USD to the nearest support at 1.2242. After a breakout and an upward test, pressure on the pair will increase, this will give a sell signal with 1.2192 as the target. The next target is the 1.2115 low. If GBP/USD rises and bears show no energy at 1.2303, which is likely, the pound sterling may rush to the new monthly high at 1.2347, as moving averages benefiting the bears are in this area. Only a false breakout of this level will give an entry point into short positions. If there is no downward movement there, you could sell GBP/USD at a bounce from a high of 1.2393, keeping in mind a downward intraday correction of 30-35 pips.
COT report:
According to the COT report for March 21, there was a drop in both long and short positions. The March meeting of the Bank of England did not bring any surprises. As widely expected, the regulator raised the interest rate, hinting at further monetary tightening. this is hardly surprising given that inflation in the UK remains high. Judging by the latest data, consumer prices rose in February, forcing the regulator to stock a hawkish stance. Given that many expect a pause in the monetary tightening by the Fed, the pound sterling could maintain its upward movement. The latest COT report showed that short non-commercial positions decreased by 498 to 49,150, while long non-commercial positions declined by 3,682 to 28,652. It led to an increase in the negative delta of the non-commercial net position to -20,498 versus -17,314 a week earlier. The weekly closing price climbed to 1.2241 against 1.2199.
Signals of indicators:
Moving Averages
Trading is performed below the 30- and 50-day moving averages, which indicates bearish sentiment.
Note: The author considers the period and prices of moving averages on the one-hour chart which differs from the general definition of the classic daily moving averages on the daily chart.
Bollinger Bands
In case of a decline, the lower limit of the indicator located around 1.2255 will act as support.
Description of indicators
Moving average (a moving average determines the current trend by smoothing volatility and noise). The period is 50. It is marked in yellow on the chart.
Moving average (a moving average determines the current trend by smoothing volatility and noise). The period is 30. It is marked in green on the graph.
MACD indicator (Moving Average Convergence/Divergence – convergence/divergence of moving averages). A fast EMA period is 12. A slow EMA period is 26. The SMA period is 9.
Bollinger Bands. The period is 20.
Non-profit speculative traders are individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
Long non-commercial positions are the total number of long positions opened by non-commercial traders.
Short non-commercial positions are the total number of short positions opened by non-commercial traders.
The total non-commercial net position is a difference in the number of short and long positions opened by non-commercial traders.
The material has been provided by InstaForex Company – www.instaforex.com
Several good entry points last Friday. Now, let’s look at the 5-minute chart and figure out what actually happened. Earlier, I asked you to pay attention to the level of 1.2365 to decide when to enter the market. A buy signal was made after a decline in price and a false breakout closer to the middle of the day. The growth was about 30 pips, but then the bears were very active around 1.2393. A false breakout at this level during the US session gave a sell signal, and the pair fell by more than 40 pips.
Conditions for opening long positions on GBP/USD:
In the European session, we expect to receive a disappointing report on the UK manufacturing PMI, which may return pressure on the pair. For this reason, I will not rush into long positions. The trading plan will be to buy GBP/USD after a decline and false breakout around the nearest support at 1.2242. This will give a buy signal for the pair to rise to 1.2303, formed on the basis of today’s results and for which I expect a rather active opposition. If the pair consolidates there and undertakes a downward test, GBP/USD could reach a new monthly high of 1.2347. At this level, the bulls will again face serious problems. Following a breakout of this level, the pair could touch 1.2393, where I will take profit. If the bulls fail and miss 1.2242, we can expect a large correction. In this case, I would advise you not to rush into purchases and open long positions only near the support level of 1.2192. You could buy GBP/USD at a bounce from a low of 1.2115, keeping in mind an upward intraday correction of 30-35 pips.
Conditions for opening short positions on GBP/USD:
The bears need to be active around 1.2303, and if they miss, the bulls will be in control again. Only a false breakout there could provide a sell signal and that will bring down GBP/USD to the nearest support at 1.2242. After a breakout and an upward test, pressure on the pair will increase, this will give a sell signal with 1.2192 as the target. The next target is the 1.2115 low. If GBP/USD rises and bears show no energy at 1.2303, which is likely, the pound sterling may rush to the new monthly high at 1.2347, as moving averages benefiting the bears are in this area. Only a false breakout of this level will give an entry point into short positions. If there is no downward movement there, you could sell GBP/USD at a bounce from a high of 1.2393, keeping in mind a downward intraday correction of 30-35 pips.
COT report:
According to the COT report for March 21, there was a drop in both long and short positions. The March meeting of the Bank of England did not bring any surprises. As widely expected, the regulator raised the interest rate, hinting at further monetary tightening. this is hardly surprising given that inflation in the UK remains high. Judging by the latest data, consumer prices rose in February, forcing the regulator to stock a hawkish stance. Given that many expect a pause in the monetary tightening by the Fed, the pound sterling could maintain its upward movement. The latest COT report showed that short non-commercial positions decreased by 498 to 49,150, while long non-commercial positions declined by 3,682 to 28,652. It led to an increase in the negative delta of the non-commercial net position to -20,498 versus -17,314 a week earlier. The weekly closing price climbed to 1.2241 against 1.2199.
Signals of indicators:
Moving Averages
Trading is performed below the 30- and 50-day moving averages, which indicates bearish sentiment.
Note: The author considers the period and prices of moving averages on the one-hour chart which differs from the general definition of the classic daily moving averages on the daily chart.
Bollinger Bands
In case of a decline, the lower limit of the indicator located around 1.2255 will act as support.
Description of indicators
The material has been provided by InstaForex Company – www.instaforex.com
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