GBP/USD: trading plan for the US session on August 2nd (review of morning trades). The pound was unable to break above 1.2792
August 2, 2023 12:23 pm
In my morning forecast, I highlighted the 1.2792 level and recommended basing trading decisions on it. Let’s look at the 5-minute chart and analyze what happened there. The rise and subsequent false breakout at this level generated a sell signal for the pair, leading to a drop of over 20 points when writing this article. The technical outlook remained unchanged for the second half of the day.
To open long positions on GBP/USD, the following conditions are required:
An unsuccessful attempt by bulls to regain control of the market in the second half of the day could result in a larger pound sell-off. Strong data on changes in non-farm employment from ADP, expected to be better than economists’ forecasts and approaching June levels, could contribute to this. Therefore, I prefer to act only after a decline and the formation of a false breakout around the new support at 1.2743, which emerged based on yesterday’s trading. This will signal a buying opportunity for GBP/USD with a target of rising to the resistance level at 1.2792, from which we experienced a decline earlier today, so there should be no high expectations for further upward movement. Just above this area, moving averages favor sellers. A breakout and retest from the top down of this range will provide an additional buying signal, strengthening the pound and enabling it to reach 1.2836. Without surpassing this level, buyers of GBP/USD will find it difficult to expect further growth. If there is a breakout above this range, we can discuss a surge towards 1.2884, where I will take profits.
In the scenario of a decline in GBP/USD and the absence of buyers at 1.2743 in the second half of the day, the bearish market will continue to develop, leading to another test of the weekly minimum. If this happens, I will postpone long positions until 1.2711. Buying at that level will only be considered a false breakout. To open long positions on GBP/USD immediately on a rebound, it can be done from 1.2675 with a target of a 30-35 point correction within the day.
To open short positions on GBP/USD, the following conditions are required:
The bears achieved their goal and defended 1.2792. As long as trading remains below this range, further decline of the pair with a new weekly minimum can be expected. If US data signal a sharp slowdown in the growth of new jobs in the labor market, pressure on the pound will weaken, leading to another surge towards 1.2792. Whether the sellers can defend this range for the second time is quite debatable. Only the formation of a false breakout at this level, similar to what I discussed earlier, will create a selling signal for a decline toward the support at 1.2743. A breakout and retest from the bottom up of this range will pave the way for 1.2711. The ultimate target will be the minimum at 1.2675, where I will take profits. I expect a drop to this level only in the case of very strong US data. If GBP/USD rises and there are no bears at 1.2792 in the second half of the day, buyers will have a chance to take control of the market. In that case, only a false breakout around the next resistance at 1.2836 will signal short positions. If there is no activity there as well, I recommend selling GBP/USD from 1.2884, counting on a rebound of the pair by 30-35 points within the day.
In the COT report (Commitment of Traders) for July 25th, there was a reduction in both long and short positions. Traders were closing positions ahead of an important meeting of the Federal Reserve, where anything could have been expected. As a result, there were no significant changes in the market as the regulator raised rates, leaving the possibility for another upward move. However, it is worth noting that this report still needs to reflect the new positions of players who returned to the market after the committee meeting. Strong data on the US economy shifted the balance in favor of pound sellers and US dollar buyers. Nevertheless, as before, the optimal strategy remains buying the pound on declines, as the difference in central banks’ policies will impact the prospects for the US dollar. The last COT report stated that long non-commercial positions decreased by 28,771 to 105,498, while short non-commercial positions decreased by 25,037 to 46,503. As a result, the spread between long and short positions only decreased 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 of the pair.
Note: The author considers the period and prices of moving averages 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 decrease, the lower boundary of the indicator, around 1.2743, will act as support.
Description of Indicators:
• 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 – convergence/divergence of moving averages). 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 subject to 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 net non-commercial 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 1.2792 level and recommended basing trading decisions on it. Let’s look at the 5-minute chart and analyze what happened there. The rise and subsequent false breakout at this level generated a sell signal for the pair, leading to a drop of over 20 points when writing this article. The technical outlook remained unchanged for the second half of the day.
To open long positions on GBP/USD, the following conditions are required:
An unsuccessful attempt by bulls to regain control of the market in the second half of the day could result in a larger pound sell-off. Strong data on changes in non-farm employment from ADP, expected to be better than economists’ forecasts and approaching June levels, could contribute to this. Therefore, I prefer to act only after a decline and the formation of a false breakout around the new support at 1.2743, which emerged based on yesterday’s trading. This will signal a buying opportunity for GBP/USD with a target of rising to the resistance level at 1.2792, from which we experienced a decline earlier today, so there should be no high expectations for further upward movement. Just above this area, moving averages favor sellers. A breakout and retest from the top down of this range will provide an additional buying signal, strengthening the pound and enabling it to reach 1.2836. Without surpassing this level, buyers of GBP/USD will find it difficult to expect further growth. If there is a breakout above this range, we can discuss a surge towards 1.2884, where I will take profits.
In the scenario of a decline in GBP/USD and the absence of buyers at 1.2743 in the second half of the day, the bearish market will continue to develop, leading to another test of the weekly minimum. If this happens, I will postpone long positions until 1.2711. Buying at that level will only be considered a false breakout. To open long positions on GBP/USD immediately on a rebound, it can be done from 1.2675 with a target of a 30-35 point correction within the day.
To open short positions on GBP/USD, the following conditions are required:
The bears achieved their goal and defended 1.2792. As long as trading remains below this range, further decline of the pair with a new weekly minimum can be expected. If US data signal a sharp slowdown in the growth of new jobs in the labor market, pressure on the pound will weaken, leading to another surge towards 1.2792. Whether the sellers can defend this range for the second time is quite debatable. Only the formation of a false breakout at this level, similar to what I discussed earlier, will create a selling signal for a decline toward the support at 1.2743. A breakout and retest from the bottom up of this range will pave the way for 1.2711. The ultimate target will be the minimum at 1.2675, where I will take profits. I expect a drop to this level only in the case of very strong US data. If GBP/USD rises and there are no bears at 1.2792 in the second half of the day, buyers will have a chance to take control of the market. In that case, only a false breakout around the next resistance at 1.2836 will signal short positions. If there is no activity there as well, I recommend selling GBP/USD from 1.2884, counting on a rebound of the pair by 30-35 points within the day.
In the COT report (Commitment of Traders) for July 25th, there was a reduction in both long and short positions. Traders were closing positions ahead of an important meeting of the Federal Reserve, where anything could have been expected. As a result, there were no significant changes in the market as the regulator raised rates, leaving the possibility for another upward move. However, it is worth noting that this report still needs to reflect the new positions of players who returned to the market after the committee meeting. Strong data on the US economy shifted the balance in favor of pound sellers and US dollar buyers. Nevertheless, as before, the optimal strategy remains buying the pound on declines, as the difference in central banks’ policies will impact the prospects for the US dollar. The last COT report stated that long non-commercial positions decreased by 28,771 to 105,498, while short non-commercial positions decreased by 25,037 to 46,503. As a result, the spread between long and short positions only decreased 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 of the pair.
Note: The author considers the period and prices of moving averages 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 decrease, the lower boundary of the indicator, around 1.2743, will act as support.
Description of Indicators:
• 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 – convergence/divergence of moving averages). 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 subject to 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 net non-commercial position is the difference between non-commercial traders’ short and long positions.
The material has been provided by InstaForex Company – www.instaforex.com
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