GBP/USD trading plan for European session on August 18, 2023. COT report and overview of yesterday’s trades. The pound continues
August 18, 2023 9:26 am
Yesterday, the pair formed only one signal to enter the market. Let’s analyze what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2723 as a possible entry point. Trading around this level did not produce any signal, so the technical picture was completely revised for the second half of the day. During the US session, a false breakout at 1.2764 gave a good sell signal, but unfortunately, the pair did not fall immediately, and the pound’s sharp growth led to the consolidation of losses.
For long positions on GBP/USD:
The UK retail sales data has already been released. The pound retreated after the latest report showed that British sales fell more than expected. The decline in retail sales is good for the Bank of England, as it will help to cool a bit inflation, which is still three times higher than the target level of 2.0%. For this reason, it would be best to act on a decline from the support level at 1.2726. A false breakout of this level could form a good entry point for long positions in hopes of updating the weekly highs, as well as confirm the presence of major buyers, leading to an upward move targeting the resistance at 1.2764. A breakout and consolidation above this range could set the stage for a bullish market, with the goal of updating 1.2812 – a two-week high. The ultimate target remains the area of 1.2847 where I will be locking in profits. If GBP/USD declines and there is no buying activity at 1.2726, the pound will be under pressure, which will push the pair into the sideways channel. In this case, only the defense of the 1.2688 area and its false breakout would give a signal for opening long positions. I will open long positions immediately on a rebound from the monthly low of 1.2654, keeping in mind a daily correction of 30-35 pips.
For short positions on GBP/USD:
The bears failed to defend the weekly high. Therefore, we should be cautious today. So I expect new sellers to appear in the area of the nearest resistance level at 1.2764, which was formed yesterday. Unsuccessful consolidation at this level will produce a sell signal with a prospect of falling to 1.2726, which was tested today after the retail sales report. A breakout of this level and its upward retest would significantly dent the bulls’ positions, offering a chance for a more substantial decline towards the low of 1.2688. The ultimate target is still this month’s low at 1.2654 where I will be locking in profits. If GBP/USD trends upward during the European session and if no selling activity is observed at 1.2764, which is possible, given how stubborn the pound is even as the US dollar firmed across the board, the bulls will not regain control of the market, but they will get a chance to start an upward correction towards 1.2812. Only a false breakout at this level would provide an entry point for going short. If there is no downward movement there, I would sell the pound right on a rebound from 1.2847, keeping in mind an intraday correction of 30-35 pips.
COT report:
The Commitments of Traders (COT) report for August 8th recorded a decline in both long and short positions. Traders have been closing their positions ahead of important UK GDP data, realizing that the Bank of England would continue to raise interest rates, no matter the cost. Good data on the British economy allowed the market to maintain balance, preventing a significant sell-off of the British pound last week, which was triggered by another increase in inflation in the US. However, the optimal strategy is to buy the pound on dips, as the difference in the policies of the central banks will affect the prospects of the US dollar, putting pressure on it. The latest COT report indicates that long positions of the non-commercial group of traders have decreased by 8,936 to 93,239, while short positions fell by 6,394 to 36,219. As a result, the spread between long and short positions increased by 185. The weekly closing price dropped to 1.2749 compared to the prior value of 1.2775.
Indicator signals:
Moving Averages
Trading is taking place around the 30-day and 50-day moving averages, indicating a sideways market trend.
Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.
Bollinger Bands
If GBP/USD falls, the indicator’s lower border near 1.2726 will serve as support.
Description of indicators:
• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;
• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;
• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;
• Bollinger Bands: 20-day period;
• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements;
• Long non-commercial positions represent the total number of long positions opened by non-commercial traders;
• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;
• The 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
Yesterday, the pair formed only one signal to enter the market. Let’s analyze what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2723 as a possible entry point. Trading around this level did not produce any signal, so the technical picture was completely revised for the second half of the day. During the US session, a false breakout at 1.2764 gave a good sell signal, but unfortunately, the pair did not fall immediately, and the pound’s sharp growth led to the consolidation of losses.
For long positions on GBP/USD:
The UK retail sales data has already been released. The pound retreated after the latest report showed that British sales fell more than expected. The decline in retail sales is good for the Bank of England, as it will help to cool a bit inflation, which is still three times higher than the target level of 2.0%. For this reason, it would be best to act on a decline from the support level at 1.2726. A false breakout of this level could form a good entry point for long positions in hopes of updating the weekly highs, as well as confirm the presence of major buyers, leading to an upward move targeting the resistance at 1.2764. A breakout and consolidation above this range could set the stage for a bullish market, with the goal of updating 1.2812 – a two-week high. The ultimate target remains the area of 1.2847 where I will be locking in profits. If GBP/USD declines and there is no buying activity at 1.2726, the pound will be under pressure, which will push the pair into the sideways channel. In this case, only the defense of the 1.2688 area and its false breakout would give a signal for opening long positions. I will open long positions immediately on a rebound from the monthly low of 1.2654, keeping in mind a daily correction of 30-35 pips.
For short positions on GBP/USD:
The bears failed to defend the weekly high. Therefore, we should be cautious today. So I expect new sellers to appear in the area of the nearest resistance level at 1.2764, which was formed yesterday. Unsuccessful consolidation at this level will produce a sell signal with a prospect of falling to 1.2726, which was tested today after the retail sales report. A breakout of this level and its upward retest would significantly dent the bulls’ positions, offering a chance for a more substantial decline towards the low of 1.2688. The ultimate target is still this month’s low at 1.2654 where I will be locking in profits. If GBP/USD trends upward during the European session and if no selling activity is observed at 1.2764, which is possible, given how stubborn the pound is even as the US dollar firmed across the board, the bulls will not regain control of the market, but they will get a chance to start an upward correction towards 1.2812. Only a false breakout at this level would provide an entry point for going short. If there is no downward movement there, I would sell the pound right on a rebound from 1.2847, keeping in mind an intraday correction of 30-35 pips.
COT report:
The Commitments of Traders (COT) report for August 8th recorded a decline in both long and short positions. Traders have been closing their positions ahead of important UK GDP data, realizing that the Bank of England would continue to raise interest rates, no matter the cost. Good data on the British economy allowed the market to maintain balance, preventing a significant sell-off of the British pound last week, which was triggered by another increase in inflation in the US. However, the optimal strategy is to buy the pound on dips, as the difference in the policies of the central banks will affect the prospects of the US dollar, putting pressure on it. The latest COT report indicates that long positions of the non-commercial group of traders have decreased by 8,936 to 93,239, while short positions fell by 6,394 to 36,219. As a result, the spread between long and short positions increased by 185. The weekly closing price dropped to 1.2749 compared to the prior value of 1.2775.
Indicator signals:
Moving Averages
Trading is taking place around the 30-day and 50-day moving averages, indicating a sideways market trend.
Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.
Bollinger Bands
If GBP/USD falls, the indicator’s lower border near 1.2726 will serve as support.
Description of indicators:
• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;
• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;
• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;
• Bollinger Bands: 20-day period;
• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements;
• Long non-commercial positions represent the total number of long positions opened by non-commercial traders;
• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;
• The 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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