GBP/USD: trading plan for the American session on August 4th (analysis of morning trades). The pound experienced a slight
August 4, 2023 12:25 pm
In my morning forecast, I emphasized the level of 1.2735 and recommended making trading decisions based on it. Now, let’s take a look at the 5-minute chart to analyze what occurred. The rise and the subsequent false breakout at this level generated a sell signal for the pair, leading to a decline of over 30 points. However, due to low volatility, the technical picture remained unchanged for the second half of the day.
For opening long positions on GBP/USD, the following is required:
All attention now shifts to the changes in the US non-farm payroll. An increase in the indicator above economists’ forecasts for July could result in a sharp decline in the pair and a retest of the monthly lows. If the data shows a cooling in the labor market, the pound may have a chance for further recovery at the end of the week. If the pair does decline, I will act based on the morning forecast: a formation of a false breakout at 1.2681 would offer a good entry point for long positions, leading to a bounce back to the resistance area at 1.2735, from where the pair slightly retraced in the first half of the day. There are also moving averages playing in favor of sellers. A breakout and consolidation above this range would present an opportunity for an upward correction with a target at 1.2786. The ultimate target will be the resistance at 1.2836, where I recommend taking a profit. In the scenario of a decline to 1.2681 and the absence of buyers there in the second half of the day, pressure on the pound will increase. In such a case, only the defense of the next area at 1.2623, as well as a false breakout at that level, would provide a signal to open long positions. I plan to buy GBP/USD only on a rebound from the minimum of 1.2592, targeting a 30-35 point correction within the day.
For opening short positions on GBP/USD, the following is required:
Bears are waiting for the labor market data, anticipating positive indicators. If the report is negative, defending the resistance at 1.2735 will be a priority task. A failed consolidation above this range would signal a sell-off with a prospect of returning to the area of 1.2681. A breakout and a bottom-up retest of this range will deal a more serious blow to buyer positions, providing a chance for a larger decline of GBP/USD toward the weekly low at 1.2623. The ultimate target will be the minimum at 1.2592, where I will take profit. In the case of an upward movement of GBP/USD and the absence of activity at 1.2735, the situation will fully shift in favor of buyers in the second half of the day, and bulls will have a chance to build an upward correction towards 1.2786. Only a false breakout at this level would provide an entry point for short positions. If there is no downward movement and opportunity, I will sell the pound immediately on a bounce from 1.2836, but only with the expectation of a pair correction downwards by 30-35 pips within the day.
In the COT report (Commitment of Traders) as of July 25th, there was a reduction in both long and short positions. Traders closed positions ahead of the important meeting of the Federal Reserve, from which anything could be expected. As a result, there were no significant changes in the market, as the regulator raised rates, leaving room for another upward move. However, it is worth noting that this report does not yet reflect the new positions of players who returned to the market after the committee meeting. Presumably, strong data on the US economy shifted the weight in favor of pound sellers and US dollar buyers. Nevertheless, as before, buying the pound on declines remains the optimal strategy, as the difference in central banks’ policies will affect the prospects of the US dollar. The latest COT report indicates that long non-commercial positions decreased by 28,771 to the level of 105,498, while short non-commercial positions fell by 25,037 to 46,503. As a result, the spread between long and short positions decreased only by 163. The weekly price dropped to 1.2837 from 1.3049.
Indicator signals:
Moving averages
Trading is conducted below the 30 and 50-day moving averages, indicating a further decline in the pair.
Note: The period and prices of moving averages considered by the author are on the hourly chart (H1) and differ from the general definition of classical daily moving averages on the daily chart (D1).
Bollinger Bands:
In case of a decline, the lower boundary of the indicator around 1.2681 will act as support.
Description of Indicators:
• Moving Average (a moving average that determines the current trend by smoothing volatility and noise). Period 50. Marked on the chart in yellow.
• Moving Average (a moving average that determines the current trend by smoothing volatility and noise). Period 30. Marked on the chart in green.
• MACD Indicator (Moving Average Convergence/Divergence – convergence/divergence of moving averages). Fast EMA period 12. Slow EMA period 26. SMA period 9.
• Bollinger Bands (Bollinger Bands). Period 20.
• Non-commercial traders – speculators, such as individual traders, hedge funds, and large institutions, using the futures market for speculative purposes and meeting certain requirements.
• Long non-commercial positions represent the total long open positions of non-commercial traders.
• Short non-commercial positions represent the total short open positions of non-commercial traders.
• The net non-commercial position is the difference between the short and long positions of non-commercial traders.
The material has been provided by InstaForex Company – www.instaforex.com
In my morning forecast, I emphasized the level of 1.2735 and recommended making trading decisions based on it. Now, let’s take a look at the 5-minute chart to analyze what occurred. The rise and the subsequent false breakout at this level generated a sell signal for the pair, leading to a decline of over 30 points. However, due to low volatility, the technical picture remained unchanged for the second half of the day.
For opening long positions on GBP/USD, the following is required:
All attention now shifts to the changes in the US non-farm payroll. An increase in the indicator above economists’ forecasts for July could result in a sharp decline in the pair and a retest of the monthly lows. If the data shows a cooling in the labor market, the pound may have a chance for further recovery at the end of the week. If the pair does decline, I will act based on the morning forecast: a formation of a false breakout at 1.2681 would offer a good entry point for long positions, leading to a bounce back to the resistance area at 1.2735, from where the pair slightly retraced in the first half of the day. There are also moving averages playing in favor of sellers. A breakout and consolidation above this range would present an opportunity for an upward correction with a target at 1.2786. The ultimate target will be the resistance at 1.2836, where I recommend taking a profit. In the scenario of a decline to 1.2681 and the absence of buyers there in the second half of the day, pressure on the pound will increase. In such a case, only the defense of the next area at 1.2623, as well as a false breakout at that level, would provide a signal to open long positions. I plan to buy GBP/USD only on a rebound from the minimum of 1.2592, targeting a 30-35 point correction within the day.
For opening short positions on GBP/USD, the following is required:
Bears are waiting for the labor market data, anticipating positive indicators. If the report is negative, defending the resistance at 1.2735 will be a priority task. A failed consolidation above this range would signal a sell-off with a prospect of returning to the area of 1.2681. A breakout and a bottom-up retest of this range will deal a more serious blow to buyer positions, providing a chance for a larger decline of GBP/USD toward the weekly low at 1.2623. The ultimate target will be the minimum at 1.2592, where I will take profit. In the case of an upward movement of GBP/USD and the absence of activity at 1.2735, the situation will fully shift in favor of buyers in the second half of the day, and bulls will have a chance to build an upward correction towards 1.2786. Only a false breakout at this level would provide an entry point for short positions. If there is no downward movement and opportunity, I will sell the pound immediately on a bounce from 1.2836, but only with the expectation of a pair correction downwards by 30-35 pips within the day.
In the COT report (Commitment of Traders) as of July 25th, there was a reduction in both long and short positions. Traders closed positions ahead of the important meeting of the Federal Reserve, from which anything could be expected. As a result, there were no significant changes in the market, as the regulator raised rates, leaving room for another upward move. However, it is worth noting that this report does not yet reflect the new positions of players who returned to the market after the committee meeting. Presumably, strong data on the US economy shifted the weight in favor of pound sellers and US dollar buyers. Nevertheless, as before, buying the pound on declines remains the optimal strategy, as the difference in central banks’ policies will affect the prospects of the US dollar. The latest COT report indicates that long non-commercial positions decreased by 28,771 to the level of 105,498, while short non-commercial positions fell by 25,037 to 46,503. As a result, the spread between long and short positions decreased only by 163. The weekly price dropped to 1.2837 from 1.3049.
Indicator signals:
Moving averages
Trading is conducted below the 30 and 50-day moving averages, indicating a further decline in the pair.
Note: The period and prices of moving averages considered by the author are on the hourly chart (H1) and differ from the general definition of classical daily moving averages on the daily chart (D1).
Bollinger Bands:
In case of a decline, the lower boundary of the indicator around 1.2681 will act as support.
Description of Indicators:
• Moving Average (a moving average that determines the current trend by smoothing volatility and noise). Period 50. Marked on the chart in yellow.
• Moving Average (a moving average that determines the current trend by smoothing volatility and noise). Period 30. Marked on the chart in green.
• MACD Indicator (Moving Average Convergence/Divergence – convergence/divergence of moving averages). Fast EMA period 12. Slow EMA period 26. SMA period 9.
• Bollinger Bands (Bollinger Bands). Period 20.
• Non-commercial traders – speculators, such as individual traders, hedge funds, and large institutions, using the futures market for speculative purposes and meeting certain requirements.
• Long non-commercial positions represent the total long open positions of non-commercial traders.
• Short non-commercial positions represent the total short open positions of non-commercial traders.
• The net non-commercial position is the difference between the short and long positions of non-commercial traders.
The material has been provided by InstaForex Company – www.instaforex.com
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