GBP/USD trading plan for New York session on August 14, 2023. Overview of morning trades. GBP recovers slightly
August 14, 2023 12:24 pm
In my morning review, I mentioned the level of 1.2697 as a possible point to enter the market. Let’s analyze what happened on the 5-minute chart. A rise to this level and its false breakout signaled a selling opportunity. However, the pair failed to develop strong selling momentum in the second half of the day. Consequently, I decided to exit the market and review the technical setup.
For long positions on GBP/USD
With the absence of US statistics, trading will likely remain within a sideways channel during the North American session. It is better not to rush into buying just yet. Only after witnessing a false breakout around the newly formed support at 1.2670, which was formed during the day’s first half, would there be a credible signal for initiating long positions, aiming to surpass Friday’s resistance at 1.2725. A decisive move and settling above this range would offer a chance for a bullish market and a potential peak at 1.2773. My primary target for taking profits would be the 1.2812 resistance level. Should the price drop to 1.2670 and lack bullish support in the afternoon, the pound would face increased pressure. In such a scenario, only the next support area at 1.2623, followed by a false breakout, would provide a cue for opening long positions. I would consider buying GBP/USD right from a rebound and only at a low of 1.2592, keeping in mind a daily correction of 30-35 pips.
For short positions on GBP/USD
Despite the pound’s uptick, trading remains range-bound, giving bears ample opportunities for a continued downward trajectory. Sellers, however, should exercise utmost caution. Only a failure to breach the 1.2725 mark would signal a selling opportunity with a downward target at 1.2670. A breakout and an upward retest of this range could significantly jeopardize the buyers’ stance, paving the way for a deeper fall towards 1.2623. The ultimate profit-taking point would be around the 1.2592 mark. If GBP/USD surges and shows lackluster activity at 1.2725 during the second half of the day, control might shift in favor of the buyers. This could give the bulls a chance to drive an upward correction towards 1.2773. Only a false breakout here would offer an entry point for short positions. Without a downward move and strong buying activity, I would sell the pound immediately on a rebound from 1.2812, hoping for a correction of 30-35 pips during the day.
COT report
The Commitments of Traders (COT) report for August 1st recorded a decline in both long and short positions. Traders have been closing their positions in anticipation of a crucial meeting of the Bank of England. Interestingly, despite recent decisions by the US Federal Reserve and the European Central Bank, the Bank of England signaled its intention to maintain an aggressive stance in an attempt to combat rising inflation. Notably, the recent COT report does not take into account the changes after the regulator’s meeting. Therefore, we can downplay the results of this report. Looking ahead, markets anticipate an important GDP report from the UK which serves as the main gauge for the Bank of England when making policy decisions. However, the optimal strategy remains to buy the pound on dips. The difference in central banks’ policies will continue to influence the prospects of the US dollar, asserting downward pressure on it. The latest COT report indicates that long positions of the non-commercial group of traders have decreased by 13,323 to 92,175, while short positions dipped by 3,890 to 42,613. Consequently, the spread between long and short positions narrowed by 1,308. The weekly closing price dropped to 1.2775 compared to the prior value of 1.2837.
Indicator signals:
Moving Averages
Trading around the 30- and 50-day moving averages indicates a sideways nature of the market.
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
In case of a decline, the lower band of the indicator at 1.2670 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
In my morning review, I mentioned the level of 1.2697 as a possible point to enter the market. Let’s analyze what happened on the 5-minute chart. A rise to this level and its false breakout signaled a selling opportunity. However, the pair failed to develop strong selling momentum in the second half of the day. Consequently, I decided to exit the market and review the technical setup.
For long positions on GBP/USD
With the absence of US statistics, trading will likely remain within a sideways channel during the North American session. It is better not to rush into buying just yet. Only after witnessing a false breakout around the newly formed support at 1.2670, which was formed during the day’s first half, would there be a credible signal for initiating long positions, aiming to surpass Friday’s resistance at 1.2725. A decisive move and settling above this range would offer a chance for a bullish market and a potential peak at 1.2773. My primary target for taking profits would be the 1.2812 resistance level. Should the price drop to 1.2670 and lack bullish support in the afternoon, the pound would face increased pressure. In such a scenario, only the next support area at 1.2623, followed by a false breakout, would provide a cue for opening long positions. I would consider buying GBP/USD right from a rebound and only at a low of 1.2592, keeping in mind a daily correction of 30-35 pips.
For short positions on GBP/USD
Despite the pound’s uptick, trading remains range-bound, giving bears ample opportunities for a continued downward trajectory. Sellers, however, should exercise utmost caution. Only a failure to breach the 1.2725 mark would signal a selling opportunity with a downward target at 1.2670. A breakout and an upward retest of this range could significantly jeopardize the buyers’ stance, paving the way for a deeper fall towards 1.2623. The ultimate profit-taking point would be around the 1.2592 mark. If GBP/USD surges and shows lackluster activity at 1.2725 during the second half of the day, control might shift in favor of the buyers. This could give the bulls a chance to drive an upward correction towards 1.2773. Only a false breakout here would offer an entry point for short positions. Without a downward move and strong buying activity, I would sell the pound immediately on a rebound from 1.2812, hoping for a correction of 30-35 pips during the day.
COT report
The Commitments of Traders (COT) report for August 1st recorded a decline in both long and short positions. Traders have been closing their positions in anticipation of a crucial meeting of the Bank of England. Interestingly, despite recent decisions by the US Federal Reserve and the European Central Bank, the Bank of England signaled its intention to maintain an aggressive stance in an attempt to combat rising inflation. Notably, the recent COT report does not take into account the changes after the regulator’s meeting. Therefore, we can downplay the results of this report. Looking ahead, markets anticipate an important GDP report from the UK which serves as the main gauge for the Bank of England when making policy decisions. However, the optimal strategy remains to buy the pound on dips. The difference in central banks’ policies will continue to influence the prospects of the US dollar, asserting downward pressure on it. The latest COT report indicates that long positions of the non-commercial group of traders have decreased by 13,323 to 92,175, while short positions dipped by 3,890 to 42,613. Consequently, the spread between long and short positions narrowed by 1,308. The weekly closing price dropped to 1.2775 compared to the prior value of 1.2837.
Indicator signals:
Moving Averages
Trading around the 30- and 50-day moving averages indicates a sideways nature of the market.
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
In case of a decline, the lower band of the indicator at 1.2670 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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