GBP/USD trading plan for European session on May 24, 2023. COT report and overview of yesterday’s trades. Pound rose on inflation
May 24, 2023 9:22 am
Yesterday, the pair formed several entry signals. Let’s have a look at the 5-minute chart and see what happened there. In my morning review, I mentioned the level of 1.2392 as a possible entry point. A decline to this level and its false breakout generated a nice buy signal. However, after rising by almost 20 pips, demand sharply fell. In the second half of the day, a failed consolidation above 1.2429 produced a sell signal. As a result, the price fell by more than 40 pips.
For long positions on GBP/USD:
Today, inflation figures in the UK have already been released, and pressure on the price turned out to be much higher than expectations, triggering long positions on the pound. But will bulls have enough strength in such a bearish market and with the US debt limit issue causing significant problems to create a strong bullish correction? It’s quite difficult to answer that. Considering that Bank of England Governor Andrew Bailey is also scheduled to speak today, the pound still has a chance to rise.
I will only act when the pair is trading lower, after the bulls confidently defend the nearest support level of 1.2417, where the moving averages favor the bulls. After a false breakout at this mark, we can expect a possible recovery of the pair and it could rise to 1.2466. A breakout and a consolidation above this range will form an additional buy signal, with 1.2507 as the target. The most distant target is seen in the area of 1.2542, where I will take profit.
If GBP/USD declines and there are no bulls at 1.2417, the bearish sentiment will persist. If that happens, I recommend postponing long positions until the price hits 1.2373, which is the new monthly low. Buying will only be considered on a false breakout there. Opening long positions on GBP/USD immediately on a rebound can be done from 1.2325, keeping in mind an intraday correction of 30-35 pips.
For short positions on GBP/USD:
Bears retreated after a discouraging inflation report, but in general, nothing has changed. At best, the pair will continue to trade within a sideways channel. Everyone is focused on Bailey’s statements. If his tone doesn’t change, and God forbid, he mentions that inflation targets are being met – that is clearly a dovish stance – the pound could quickly collapse as it rose today. Therefore, I will hold off on selling until there is a false breakout of the nearest resistance level at 1.2466, formed based on last Friday’s outcome. The pair should fall from there. If traders are not actively selling the instrument, it would be better to leave short positions. In this case, the bears will aim for the 1.2417 low. A breakout and a subsequent bottom-up test of this range will provide a sell entry point, and the pound could fall to 1.2373. The most distant target is seen in the area of 1.2325, where I will take profit.
If GBP/USD rises and bears are idle at 1.2466, bulls will gain a significant advantage. So it is best to hold back from selling until the pair tests a larger resistance level at 1.2507. A false breakout at that level will provide an entry point into short positions. If there is no downward movement at that mark, I would advise selling GBP/USD from 1.2542, expecting a rebound of 30-35 pips within the day.
COT report:
According to the Commitments of Traders (COT) report as of May 16, there was an increase in long positions and a decrease in short positions. The correction in the British pound was quite significant, and the pair is trading at very attractive prices, which is reflected in the report. Once the issue of the US debt ceiling is resolved, I believe that the demand for risk assets will return, and the pound will be able to recover quite substantially. It is worth noting that the Federal Reserve plans to pause its cycle of interest rate hikes, which will also put pressure on the US dollar. The latest COT report states that short positions of the non-commercial group of traders decreased by 2,238 to 64,795, while long positions jumped by 5,827 to f 77,388. This led to an increase in the non-commercial net position to 12,593 compared to 4,528 the previous week. The weekly closing price declined to 1.2495 from 1.2635.
Indicator signals:
Moving Averages
Trading is carried out above the 30 and 50 daily moving averages, which indicates a bullish correction.
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 the pair falls, the lower band of the indicator at 1.2390 will act 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 several entry signals. Let’s have a look at the 5-minute chart and see what happened there. In my morning review, I mentioned the level of 1.2392 as a possible entry point. A decline to this level and its false breakout generated a nice buy signal. However, after rising by almost 20 pips, demand sharply fell. In the second half of the day, a failed consolidation above 1.2429 produced a sell signal. As a result, the price fell by more than 40 pips.
For long positions on GBP/USD:
Today, inflation figures in the UK have already been released, and pressure on the price turned out to be much higher than expectations, triggering long positions on the pound. But will bulls have enough strength in such a bearish market and with the US debt limit issue causing significant problems to create a strong bullish correction? It’s quite difficult to answer that. Considering that Bank of England Governor Andrew Bailey is also scheduled to speak today, the pound still has a chance to rise.
I will only act when the pair is trading lower, after the bulls confidently defend the nearest support level of 1.2417, where the moving averages favor the bulls. After a false breakout at this mark, we can expect a possible recovery of the pair and it could rise to 1.2466. A breakout and a consolidation above this range will form an additional buy signal, with 1.2507 as the target. The most distant target is seen in the area of 1.2542, where I will take profit.
If GBP/USD declines and there are no bulls at 1.2417, the bearish sentiment will persist. If that happens, I recommend postponing long positions until the price hits 1.2373, which is the new monthly low. Buying will only be considered on a false breakout there. Opening long positions on GBP/USD immediately on a rebound can be done from 1.2325, keeping in mind an intraday correction of 30-35 pips.
For short positions on GBP/USD:
Bears retreated after a discouraging inflation report, but in general, nothing has changed. At best, the pair will continue to trade within a sideways channel. Everyone is focused on Bailey’s statements. If his tone doesn’t change, and God forbid, he mentions that inflation targets are being met – that is clearly a dovish stance – the pound could quickly collapse as it rose today. Therefore, I will hold off on selling until there is a false breakout of the nearest resistance level at 1.2466, formed based on last Friday’s outcome. The pair should fall from there. If traders are not actively selling the instrument, it would be better to leave short positions. In this case, the bears will aim for the 1.2417 low. A breakout and a subsequent bottom-up test of this range will provide a sell entry point, and the pound could fall to 1.2373. The most distant target is seen in the area of 1.2325, where I will take profit.
If GBP/USD rises and bears are idle at 1.2466, bulls will gain a significant advantage. So it is best to hold back from selling until the pair tests a larger resistance level at 1.2507. A false breakout at that level will provide an entry point into short positions. If there is no downward movement at that mark, I would advise selling GBP/USD from 1.2542, expecting a rebound of 30-35 pips within the day.
COT report:
According to the Commitments of Traders (COT) report as of May 16, there was an increase in long positions and a decrease in short positions. The correction in the British pound was quite significant, and the pair is trading at very attractive prices, which is reflected in the report. Once the issue of the US debt ceiling is resolved, I believe that the demand for risk assets will return, and the pound will be able to recover quite substantially. It is worth noting that the Federal Reserve plans to pause its cycle of interest rate hikes, which will also put pressure on the US dollar. The latest COT report states that short positions of the non-commercial group of traders decreased by 2,238 to 64,795, while long positions jumped by 5,827 to f 77,388. This led to an increase in the non-commercial net position to 12,593 compared to 4,528 the previous week. The weekly closing price declined to 1.2495 from 1.2635.
Indicator signals:
Moving Averages
Trading is carried out above the 30 and 50 daily moving averages, which indicates a bullish correction.
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 the pair falls, the lower band of the indicator at 1.2390 will act 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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