GBP/USD trading plan for North American session on May 16, 2023. Overview of morning trades. GBP quickly recoups early losses
May 16, 2023 12:23 pm
In my morning review, I mentioned the level of 1.2464 as a possible entry point. Let’s have a look at the 5-minute chart to see what happened there. A decline to this level and its false breakout amid weaker-than-expected employment data from the UK formed a good entry point for buying the pound. As a result, the price jumped by more than 50 pips. The technical outlook for the second half of the day was revised.
For long positions on GBP/USD:
The US will soon publish the data on retail sales and industrial production. If these two reports show a decline, the bulls will likely continue the correction. Ideally, I would like to open buy positions at a lower level, preferably around the new support level of 1.2504 where the moving averages support the buyers. The formation of a false breakout at this level would be enough to receive a buy signal with an upward target at 1.2563, which is the new resistance formed on Friday. Consolidation above this range and its downward retest will form an additional buy signal with a possible jump to 1.2600. The ultimate target will be the area of 1.2636 where I will be taking profit.
If the pair declines at 1.2504 and bulls fail to open any new positions in the second half of the day, I will go long only when the price retests the low of 1.2467, from which the pound has already rebounded today. I will also open long positions there only after a false breakout, similar to what I have described above. I plan to buy GBP/USD immediately on the rebound from the low of 1.2436, bearing in mind an intraday correction of 30-35 pips.
For short positions on GBP/USD:
Sellers asserted their strength in the first half of the day. But as I mentioned earlier, bulls have seized the moment, encouraged by a continued rise in average earnings in the UK, which will likely keep inflation at the current 10% level, and won back all the previous losses. Now, in my opinion, a more appealing scenario for the second half of the day would be selling at 1.2563 as I couldn’t find any closer levels to rely on. Only a false breakout at 1.2563 will prompt me to open short positions, anticipating a return of pressure on GBP/USD with the prospect of a decline to 1.2504, the new daily support. A breakout and an upward retest of this range will increase pressure on the pound, forming a sell signal with a possible drop to 1.2467 that has already been tested today. The furthest target remains the low of 1.2436 where I will be taking profit.
If GBP/USD advances and bears are idle at 1.2563, which is less likely, this would trigger stop-loss orders set by the sellers. In such a case, I will sell the pair only when the price hits the resistance at 1.2600. Only a false breakout there will provide an entry point into short positions. If there is no downward movement there as well, I will sell GBP/USD on a rebound straight from 1.2636, anticipating an intraday downward correction of 30-35 pips.
COT report
The Commitments of Traders report for May 9 recorded an increase in both long and short positions. Although the Bank of England’s decision to raise interest rates is not yet reflected in these data, the active rise in long positions proves the presence of traders willing to buy the pound even at current levels. Given a noticeable correction at the end of last week, the demand for the pound may increase. The latest COT report states that short positions of the non-commercial group of traders grew by 12,900 to 71,561, while long positions jumped by 9,437 to 9,437. This led to an increase in the non-commercial net position to 4,528 against 1,065 recorded a week earlier. The pair resumed growth after a slight decline, which will have a positive impact on the pound in the future. The weekly closing price rose to 1.2635 against 1.2481.
Indicator signals:
Moving Averages
Trading just above the 30- and 50-day moving averages indicates an intensive fight between bulls and bears.
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 rise, the upper band of the indicator at 1.2545 will serve as resistance.
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 1.2464 as a possible entry point. Let’s have a look at the 5-minute chart to see what happened there. A decline to this level and its false breakout amid weaker-than-expected employment data from the UK formed a good entry point for buying the pound. As a result, the price jumped by more than 50 pips. The technical outlook for the second half of the day was revised.
For long positions on GBP/USD:
The US will soon publish the data on retail sales and industrial production. If these two reports show a decline, the bulls will likely continue the correction. Ideally, I would like to open buy positions at a lower level, preferably around the new support level of 1.2504 where the moving averages support the buyers. The formation of a false breakout at this level would be enough to receive a buy signal with an upward target at 1.2563, which is the new resistance formed on Friday. Consolidation above this range and its downward retest will form an additional buy signal with a possible jump to 1.2600. The ultimate target will be the area of 1.2636 where I will be taking profit.
If the pair declines at 1.2504 and bulls fail to open any new positions in the second half of the day, I will go long only when the price retests the low of 1.2467, from which the pound has already rebounded today. I will also open long positions there only after a false breakout, similar to what I have described above. I plan to buy GBP/USD immediately on the rebound from the low of 1.2436, bearing in mind an intraday correction of 30-35 pips.
For short positions on GBP/USD:
Sellers asserted their strength in the first half of the day. But as I mentioned earlier, bulls have seized the moment, encouraged by a continued rise in average earnings in the UK, which will likely keep inflation at the current 10% level, and won back all the previous losses. Now, in my opinion, a more appealing scenario for the second half of the day would be selling at 1.2563 as I couldn’t find any closer levels to rely on. Only a false breakout at 1.2563 will prompt me to open short positions, anticipating a return of pressure on GBP/USD with the prospect of a decline to 1.2504, the new daily support. A breakout and an upward retest of this range will increase pressure on the pound, forming a sell signal with a possible drop to 1.2467 that has already been tested today. The furthest target remains the low of 1.2436 where I will be taking profit.
If GBP/USD advances and bears are idle at 1.2563, which is less likely, this would trigger stop-loss orders set by the sellers. In such a case, I will sell the pair only when the price hits the resistance at 1.2600. Only a false breakout there will provide an entry point into short positions. If there is no downward movement there as well, I will sell GBP/USD on a rebound straight from 1.2636, anticipating an intraday downward correction of 30-35 pips.
COT report
The Commitments of Traders report for May 9 recorded an increase in both long and short positions. Although the Bank of England’s decision to raise interest rates is not yet reflected in these data, the active rise in long positions proves the presence of traders willing to buy the pound even at current levels. Given a noticeable correction at the end of last week, the demand for the pound may increase. The latest COT report states that short positions of the non-commercial group of traders grew by 12,900 to 71,561, while long positions jumped by 9,437 to 9,437. This led to an increase in the non-commercial net position to 4,528 against 1,065 recorded a week earlier. The pair resumed growth after a slight decline, which will have a positive impact on the pound in the future. The weekly closing price rose to 1.2635 against 1.2481.
Indicator signals:
Moving Averages
Trading just above the 30- and 50-day moving averages indicates an intensive fight between bulls and bears.
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 rise, the upper band of the indicator at 1.2545 will serve as resistance.
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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