GBP/USD: trading plan for the US session on July 25th (analysis of morning deals). The pound showed a strong performance
July 25, 2023 11:25 am
In my morning forecast, I highlighted the importance of level 1.2857 and recommended making entry decisions based on it. Now, let’s review the 5-minute chart to analyze what transpired. The price rose and formed a false breakout at 1.2857, which served as an excellent sell signal, resulting in a drop of over 30 points. The technical outlook remained mostly unchanged for the second half of the day.
To consider long positions on GBP/USD:
The absence of significant economic data affected the strength and enthusiasm of pound buyers, who showed some activity but failed to break above the critical level of 1.2857, which had caused the pair to decline once before yesterday. Nevertheless, the fact that new weekly lows have yet to be reached offers hope for further growth for the bulls. Ahead of us, there are housing price index figures and the housing price index for the 20 largest cities in the USA from S&P/Case-Shiller. However, the manufacturing index from the Richmond Federal Reserve and the consumer confidence indicator will have a more significant impact on the market. A rise in consumer confidence in the USA may trigger another sell-off in GBP/USD. Consequently, I will refrain from rushing into buying.
My preferred approach, as in the first half of the day, is to wait for declines towards the nearest support at 1.2809, established based on yesterday’s data. This level presents an excellent entry point for another potential rise towards the resistance at 1.2857, which is slightly below the moving averages that favor sellers. If the bulls manage a breakthrough on the second attempt and there is a top-down test of this range, it will signal a buying opportunity, strengthening the pound and potentially reaching a new high at 1.2901. With achieving this level, GBP/USD buyers may find it easier to anticipate further growth. Should a breakthrough above this range occur, we can expect a surge towards 1.2960, at which point I would take profits. However, if GBP/USD declines and buyers are absent at 1.2809 in the second half of the day, especially after strong US data, the bearish market will continue to develop, and the pound’s prospects will be uncertain. In such a scenario, I will postpone long positions until 1.2754. Buying will only be considered on a false breakout. I will enter long positions on GBP/USD right after a rebound from 1.2717, targeting a 30-35 points correction within the day.
To consider short positions on GBP/USD:
Bears have achieved their objectives today, and now they should focus on reaching new weekly lows, as without them, bulls may regain strength. It is essential to keep the pair below the lower middle of the sideways channel at 1.2857, which will maintain bearish pressure on GBP/USD and create an opportunity for a weekly low update. A false breakout formation similar to the one I discussed earlier at 1.2857 will be a sell signal, targeting a decline towards the support at 1.2809, established based on yesterday’s data. A breakthrough and a subsequent test from the bottom-up of this range will provide an entry point for selling, with the target of reaching 1.2754. The ultimate target will be the minimum at 1.2717, where I will take profits. If GBP/USD rises and bears are absent at 1.2857 in the second half of the day, it won’t be a significant concern for sellers, but they may lose some initiative. In such a scenario, only a false breakout around the upper boundary of the sideways channel at 1.2901 will provide an entry point for short positions, targeting a downward movement of the pound. If there is no activity at that level, I suggest selling GBP/USD from 1.2960, aiming for a rebound of the pair downwards by 30-35 points within the day.
In the COT report (Commitment of Traders) as of July 18, there was a substantial increase in both long and short positions. Traders began to return to the market after the release of several fundamental statistics, indicating a relatively stable state of the British economy, which is gradually adjusting to high interest rates. While the sharp decline in inflation in the USA caused the pound’s rise, its overbought condition and the strict policies of the central bank raise concerns about potential problems in the UK’s labor and housing markets. Sellers are taking advantage of this situation by increasing short positions whenever possible, as evidenced by the COT report. Recent PMI reports also suggest growing issues. This week, the Federal Reserve’s meeting will take place, and if it announces the end of the rate hike cycle, the pound may rise again. The optimal strategy remains to buy the pound on declines. The latest COT report indicates that long non-commercial positions increased by 23,602 to the level of 135,269, while short non-commercial positions increased by 17,936 to 71,540. This led to another upward spike in the non-commercial net position to the level of 63,729 against 58,063 a week earlier. The weekly closing price increased and reached 1.3049 against 1.2932.
Indicator signals:
Moving averages.
Trading is being conducted below the 30 and 50-day moving averages, indicating a further decline in the pair.
Note: The author considers the period and prices of moving averages on the hourly chart H1, which differs from the general definition of classic daily moving averages on the daily chart D1.
Bollinger Bands:
In case of a decrease, the lower boundary of the indicator, around 1.2803, will act as support.
Description of Indicators:
• 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 – 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 specific 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 importance of level 1.2857 and recommended making entry decisions based on it. Now, let’s review the 5-minute chart to analyze what transpired. The price rose and formed a false breakout at 1.2857, which served as an excellent sell signal, resulting in a drop of over 30 points. The technical outlook remained mostly unchanged for the second half of the day.
To consider long positions on GBP/USD:
The absence of significant economic data affected the strength and enthusiasm of pound buyers, who showed some activity but failed to break above the critical level of 1.2857, which had caused the pair to decline once before yesterday. Nevertheless, the fact that new weekly lows have yet to be reached offers hope for further growth for the bulls. Ahead of us, there are housing price index figures and the housing price index for the 20 largest cities in the USA from S&P/Case-Shiller. However, the manufacturing index from the Richmond Federal Reserve and the consumer confidence indicator will have a more significant impact on the market. A rise in consumer confidence in the USA may trigger another sell-off in GBP/USD. Consequently, I will refrain from rushing into buying.
My preferred approach, as in the first half of the day, is to wait for declines towards the nearest support at 1.2809, established based on yesterday’s data. This level presents an excellent entry point for another potential rise towards the resistance at 1.2857, which is slightly below the moving averages that favor sellers. If the bulls manage a breakthrough on the second attempt and there is a top-down test of this range, it will signal a buying opportunity, strengthening the pound and potentially reaching a new high at 1.2901. With achieving this level, GBP/USD buyers may find it easier to anticipate further growth. Should a breakthrough above this range occur, we can expect a surge towards 1.2960, at which point I would take profits. However, if GBP/USD declines and buyers are absent at 1.2809 in the second half of the day, especially after strong US data, the bearish market will continue to develop, and the pound’s prospects will be uncertain. In such a scenario, I will postpone long positions until 1.2754. Buying will only be considered on a false breakout. I will enter long positions on GBP/USD right after a rebound from 1.2717, targeting a 30-35 points correction within the day.
To consider short positions on GBP/USD:
Bears have achieved their objectives today, and now they should focus on reaching new weekly lows, as without them, bulls may regain strength. It is essential to keep the pair below the lower middle of the sideways channel at 1.2857, which will maintain bearish pressure on GBP/USD and create an opportunity for a weekly low update. A false breakout formation similar to the one I discussed earlier at 1.2857 will be a sell signal, targeting a decline towards the support at 1.2809, established based on yesterday’s data. A breakthrough and a subsequent test from the bottom-up of this range will provide an entry point for selling, with the target of reaching 1.2754. The ultimate target will be the minimum at 1.2717, where I will take profits. If GBP/USD rises and bears are absent at 1.2857 in the second half of the day, it won’t be a significant concern for sellers, but they may lose some initiative. In such a scenario, only a false breakout around the upper boundary of the sideways channel at 1.2901 will provide an entry point for short positions, targeting a downward movement of the pound. If there is no activity at that level, I suggest selling GBP/USD from 1.2960, aiming for a rebound of the pair downwards by 30-35 points within the day.
In the COT report (Commitment of Traders) as of July 18, there was a substantial increase in both long and short positions. Traders began to return to the market after the release of several fundamental statistics, indicating a relatively stable state of the British economy, which is gradually adjusting to high interest rates. While the sharp decline in inflation in the USA caused the pound’s rise, its overbought condition and the strict policies of the central bank raise concerns about potential problems in the UK’s labor and housing markets. Sellers are taking advantage of this situation by increasing short positions whenever possible, as evidenced by the COT report. Recent PMI reports also suggest growing issues. This week, the Federal Reserve’s meeting will take place, and if it announces the end of the rate hike cycle, the pound may rise again. The optimal strategy remains to buy the pound on declines. The latest COT report indicates that long non-commercial positions increased by 23,602 to the level of 135,269, while short non-commercial positions increased by 17,936 to 71,540. This led to another upward spike in the non-commercial net position to the level of 63,729 against 58,063 a week earlier. The weekly closing price increased and reached 1.3049 against 1.2932.
Indicator signals:
Moving averages.
Trading is being conducted below the 30 and 50-day moving averages, indicating a further decline in the pair.
Note: The author considers the period and prices of moving averages on the hourly chart H1, which differs from the general definition of classic daily moving averages on the daily chart D1.
Bollinger Bands:
In case of a decrease, the lower boundary of the indicator, around 1.2803, will act as support.
Description of Indicators:
• 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 – 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 specific 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
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