GBP/USD: trading plan for the American session on May 5th (analysis of morning deals). The pound failed to hold at monthly
May 5, 2023 1:25 pm
In my morning forecast, I drew attention to the 1.2627 level and recommended entering the market from there. Let’s look at the 5-minute chart and figure out what happened there. The growth and false breakout at this level provided an excellent entry point for short positions, which resulted in a pound fall by more than 30 points at the time of writing the article. The technical picture for the second half of the day still needs to be revised.
To open long positions on GBP/USD, it is required to:
Data on changes in the number of people employed in the non-agricultural sector and the unemployment rate in the US will dominate the market. A sharp reduction in employment and a decline in average hourly wages will lead to a return of risk appetite and a surge in the pound. However, it is best to act on the pair’s decline from the nearest support of 1.2585, where the moving averages are, which play on the bulls’ side. The formation of a false breakout there will signal a buy with the prospect of another recovery in the area of 1.2627, which could not be broken higher in the first half of the day. A breakout and consolidation above this range will form an additional signal to buy with a surge to 1.2663. The farthest target is the area of 1.2709, where I will fix the profit.
In case of a decline to the area of 1.2585 and the absence of activity from the buyers in the second half of the day, I will postpone purchases to a larger level of 1.2548. I will open long positions there only on a false breakout. I plan to buy GBP/USD immediately on the rebound only from the minimum of 1.2521, with a target of 30-35 points correction within the day.
To open short positions on GBP/USD, it is required:
Sellers showed themselves in the first half of the day, giving an excellent entry point for selling the pound, which is still valid when writing the review. In case of another growth of the pair on US data, it would be nice for bears to show themselves again in the area of 1.2627, similar to what I analyzed above. A false breakout there will provide a chance to return pressure on the pound with the prospect of a decline and touching the level of 1.2585. A breakout and a reverse test from the bottom to the top of this range will increase the pressure on the pound, forming a signal to sell with a fall to 1.2548. The farthest target remains the minimum of 1.2521, where I will fix the profit.
In the case of GBP/USD growth and the absence of activity at 1.2627, which may happen as the labor market will eventually crack due to the aggressive policy of the US, it is best to postpone sales until the next resistance test of 1.2663. Only a false breakout there will provide an entry point for short positions. Without a downward movement, I will sell GBP/USD on the rebound immediately from the maximum of 1.2709, but only with a calculation to correct the pair down by 30-35 points within the day.
In the COT report (Commitment of Traders) for April 25th, there was growth in both long and short positions, but there were more long positions. Everyone understands that the Bank of England has nowhere to go and has no choice but to continue actively raising interest rates, as the regulator has yet to make much progress in the fight against inflation recently. High-interest rates will support the pound, maintaining demand for it. Considering the current state of the American economy, which is stubbornly resisting cooling down but will have to, buying the pound against the dollar doesn’t seem like such a hopeless cause. The latest COT report states that short non-commercial positions increased by 1,034 to 53,566, while long non-commercial positions jumped by 5,571 to 59,405. This led to an increase in non-commercial net positions to 5,839, up from 1,302 a week earlier. The growth has been going on for the fifth week in a row, also confirming the bullish nature of the market. The weekly closing price decreased and was 1.2421 compared to 1.2446.
Indicator signals:
Moving averages
Trading is taking place above the 30- and 50-day moving averages, indicating the development of a bullish scenario.
Note: The author considers the period and prices of moving averages on the H1 hourly chart and differ from the general definition of classical daily moving averages on the D1 daily chart.
Bollinger Bands
In case of a decline, the lower border of the indicator at around 1.2565 will act as support.
Indicator descriptions
• Moving average (determines the current trend by smoothing volatility and noise). Period 50. Marked in yellow on the chart.
• Moving average (determines the current trend by smoothing volatility and noise). Period 30. Marked in green on the chart.
• MACD Indicator (Moving Average Convergence/Divergence). Fast EMA period 12. Slow EMA period 26. SMA period 9
• 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 position of non-commercial traders.
• The total non-commercial net 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 drew attention to the 1.2627 level and recommended entering the market from there. Let’s look at the 5-minute chart and figure out what happened there. The growth and false breakout at this level provided an excellent entry point for short positions, which resulted in a pound fall by more than 30 points at the time of writing the article. The technical picture for the second half of the day still needs to be revised.
To open long positions on GBP/USD, it is required to:
Data on changes in the number of people employed in the non-agricultural sector and the unemployment rate in the US will dominate the market. A sharp reduction in employment and a decline in average hourly wages will lead to a return of risk appetite and a surge in the pound. However, it is best to act on the pair’s decline from the nearest support of 1.2585, where the moving averages are, which play on the bulls’ side. The formation of a false breakout there will signal a buy with the prospect of another recovery in the area of 1.2627, which could not be broken higher in the first half of the day. A breakout and consolidation above this range will form an additional signal to buy with a surge to 1.2663. The farthest target is the area of 1.2709, where I will fix the profit.
In case of a decline to the area of 1.2585 and the absence of activity from the buyers in the second half of the day, I will postpone purchases to a larger level of 1.2548. I will open long positions there only on a false breakout. I plan to buy GBP/USD immediately on the rebound only from the minimum of 1.2521, with a target of 30-35 points correction within the day.
To open short positions on GBP/USD, it is required:
Sellers showed themselves in the first half of the day, giving an excellent entry point for selling the pound, which is still valid when writing the review. In case of another growth of the pair on US data, it would be nice for bears to show themselves again in the area of 1.2627, similar to what I analyzed above. A false breakout there will provide a chance to return pressure on the pound with the prospect of a decline and touching the level of 1.2585. A breakout and a reverse test from the bottom to the top of this range will increase the pressure on the pound, forming a signal to sell with a fall to 1.2548. The farthest target remains the minimum of 1.2521, where I will fix the profit.
In the case of GBP/USD growth and the absence of activity at 1.2627, which may happen as the labor market will eventually crack due to the aggressive policy of the US, it is best to postpone sales until the next resistance test of 1.2663. Only a false breakout there will provide an entry point for short positions. Without a downward movement, I will sell GBP/USD on the rebound immediately from the maximum of 1.2709, but only with a calculation to correct the pair down by 30-35 points within the day.
In the COT report (Commitment of Traders) for April 25th, there was growth in both long and short positions, but there were more long positions. Everyone understands that the Bank of England has nowhere to go and has no choice but to continue actively raising interest rates, as the regulator has yet to make much progress in the fight against inflation recently. High-interest rates will support the pound, maintaining demand for it. Considering the current state of the American economy, which is stubbornly resisting cooling down but will have to, buying the pound against the dollar doesn’t seem like such a hopeless cause. The latest COT report states that short non-commercial positions increased by 1,034 to 53,566, while long non-commercial positions jumped by 5,571 to 59,405. This led to an increase in non-commercial net positions to 5,839, up from 1,302 a week earlier. The growth has been going on for the fifth week in a row, also confirming the bullish nature of the market. The weekly closing price decreased and was 1.2421 compared to 1.2446.
Indicator signals:
Moving averages
Trading is taking place above the 30- and 50-day moving averages, indicating the development of a bullish scenario.
Note: The author considers the period and prices of moving averages on the H1 hourly chart and differ from the general definition of classical daily moving averages on the D1 daily chart.
Bollinger Bands
In case of a decline, the lower border of the indicator at around 1.2565 will act as support.
Indicator descriptions
• Moving average (determines the current trend by smoothing volatility and noise). Period 50. Marked in yellow on the chart.
• Moving average (determines the current trend by smoothing volatility and noise). Period 30. Marked in green on the chart.
• MACD Indicator (Moving Average Convergence/Divergence). Fast EMA period 12. Slow EMA period 26. SMA period 9
• 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 position of non-commercial traders.
• The total non-commercial net 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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