GBP/USD: trading plan for the US session on August 11th (analysis of morning deals). The pound reacted weakly to the GDP
August 11, 2023 1:23 pm
In my morning forecast, I highlighted the 1.2705 level and advised making market entry decisions from it. Let’s examine the 5-minute chart and see what transpired. The rise and breakthrough of 1.2705 coincided with the release of positive UK GDP data, and a retest of this level signaled a buy. However, as you can see on the chart, this trend did not sustain. As a result, I decided to exit at break-even and await new signals.
To open long positions on GBP/USD:
Everything will now depend on the US producer price data. If the numbers disappoint, demand for the pound is likely to return. However, if the data exceeds economists’ forecasts, a drop in GBP/USD toward the day’s low can be expected, where I intend to act. Only after a false breakout around the new support level at 1.2670, formed during the first half of the day, will there be a signal to open long positions in continuation of the bullish correction, aiming to surpass 1.2719 – resistance also formed during the European session where the moving averages favor sellers. A breach and consolidation above this range offer a chance to construct a bullish market, updating to a maximum of 1.2764. The ultimate target would be the 1.2812 resistance, where I recommend taking profits. If there’s a decline to 1.2670 and no buyers appear in the second half of the day, the pressure on the pound will increase. In such a scenario, only the defense of the subsequent 1.2623 zone and a false breakout there will signal the opening of long positions. I plan to buy GBP/USD immediately on a rebound from a low of 1.2592, aiming for a daily correction of 30-35 points.
To open short positions on GBP/USD:
Despite the pound’s rise, trading still occurs within a channel, and bears stand a chance for a further decline. However, sellers need to tread cautiously under the current circumstances. Following strong US data, a failed consolidation above 1.2719 would signal a sell, aiming for this month’s low at 1.2623. A breakout and a bottom-up retest of this range would severely impact buyers, allowing for a more significant GBP/USD drop to 1.2592. The farthest target would be the 1.2557 area, where I’ll take profits. If GBP/USD rises and there’s no activity at 1.2719, trading will shift under buyers’ control, allowing bulls to build a bullish correction towards 1.2764. Only a false breakout at this level will provide a short entry point. If there’s no downward movement, I will sell the pound immediately on a rebound from 1.2812, but only expect a pair correction downwards by 30-35 points within the day.
In the COT (Commitment of Traders) report for August 1, there was a reduction in both long and short positions. Traders were closing positions ahead of the crucial meeting of the Bank of England, which, despite recent decisions by the Federal Reserve and the European Central Bank, signaled the continuation of its aggressive policy to combat high inflation. The new report needs to account for changes after the regulator’s meeting, so it can be somewhat overlooked. We await crucial UK GDP data, upon which the Bank of England will base its future decisions. However, as before, the optimal strategy remains to buy the pound on declines, as the policy differences between central banks will affect the prospects of the US dollar, putting pressure on it. The latest COT report states that long non-commercial positions decreased by 13,323 to 92,175, while short non-commercial positions fell by 3,890 to 42,613. As a result, the spread between long and short positions narrowed by 1,308. The weekly price dropped to 1.2775 from 1.2837.
Indicator signals:
Moving Averages:
Trading is conducted below the 30 and 50-day moving averages, indicating a decline in the pound.
Note: The author considers the period and prices of the moving averages on the hourly H1 chart and differ from the general definition of classic daily moving averages on the D1 daily chart.
Bollinger Bands:
In the event of a decline, the lower boundary of the indicator, around 1.2660, will act as support.
Indicator descriptions:
• Moving average (determines the current trend by smoothing out volatility and noise). Period 50. Marked in yellow on the chart.
• Moving average (determines the current trend by smoothing out 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, use the futures market for speculative purposes and meet certain requirements.
• Long non-commercial positions represent the total long open position 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 non-commercial traders’ short and long positions.
The material has been provided by InstaForex Company – www.instaforex.com
In my morning forecast, I highlighted the 1.2705 level and advised making market entry decisions from it. Let’s examine the 5-minute chart and see what transpired. The rise and breakthrough of 1.2705 coincided with the release of positive UK GDP data, and a retest of this level signaled a buy. However, as you can see on the chart, this trend did not sustain. As a result, I decided to exit at break-even and await new signals.
To open long positions on GBP/USD:
Everything will now depend on the US producer price data. If the numbers disappoint, demand for the pound is likely to return. However, if the data exceeds economists’ forecasts, a drop in GBP/USD toward the day’s low can be expected, where I intend to act. Only after a false breakout around the new support level at 1.2670, formed during the first half of the day, will there be a signal to open long positions in continuation of the bullish correction, aiming to surpass 1.2719 – resistance also formed during the European session where the moving averages favor sellers. A breach and consolidation above this range offer a chance to construct a bullish market, updating to a maximum of 1.2764. The ultimate target would be the 1.2812 resistance, where I recommend taking profits. If there’s a decline to 1.2670 and no buyers appear in the second half of the day, the pressure on the pound will increase. In such a scenario, only the defense of the subsequent 1.2623 zone and a false breakout there will signal the opening of long positions. I plan to buy GBP/USD immediately on a rebound from a low of 1.2592, aiming for a daily correction of 30-35 points.
To open short positions on GBP/USD:
Despite the pound’s rise, trading still occurs within a channel, and bears stand a chance for a further decline. However, sellers need to tread cautiously under the current circumstances. Following strong US data, a failed consolidation above 1.2719 would signal a sell, aiming for this month’s low at 1.2623. A breakout and a bottom-up retest of this range would severely impact buyers, allowing for a more significant GBP/USD drop to 1.2592. The farthest target would be the 1.2557 area, where I’ll take profits. If GBP/USD rises and there’s no activity at 1.2719, trading will shift under buyers’ control, allowing bulls to build a bullish correction towards 1.2764. Only a false breakout at this level will provide a short entry point. If there’s no downward movement, I will sell the pound immediately on a rebound from 1.2812, but only expect a pair correction downwards by 30-35 points within the day.
In the COT (Commitment of Traders) report for August 1, there was a reduction in both long and short positions. Traders were closing positions ahead of the crucial meeting of the Bank of England, which, despite recent decisions by the Federal Reserve and the European Central Bank, signaled the continuation of its aggressive policy to combat high inflation. The new report needs to account for changes after the regulator’s meeting, so it can be somewhat overlooked. We await crucial UK GDP data, upon which the Bank of England will base its future decisions. However, as before, the optimal strategy remains to buy the pound on declines, as the policy differences between central banks will affect the prospects of the US dollar, putting pressure on it. The latest COT report states that long non-commercial positions decreased by 13,323 to 92,175, while short non-commercial positions fell by 3,890 to 42,613. As a result, the spread between long and short positions narrowed by 1,308. The weekly price dropped to 1.2775 from 1.2837.
Indicator signals:
Moving Averages:
Trading is conducted below the 30 and 50-day moving averages, indicating a decline in the pound.
Note: The author considers the period and prices of the moving averages on the hourly H1 chart and differ from the general definition of classic daily moving averages on the D1 daily chart.
Bollinger Bands:
In the event of a decline, the lower boundary of the indicator, around 1.2660, will act as support.
Indicator descriptions:
• Moving average (determines the current trend by smoothing out volatility and noise). Period 50. Marked in yellow on the chart.
• Moving average (determines the current trend by smoothing out 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, use the futures market for speculative purposes and meet certain requirements.
• Long non-commercial positions represent the total long open position 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 non-commercial traders’ short and long positions.
The material has been provided by InstaForex Company – www.instaforex.com
Related Posts: