GBP/USD: plan for the European session on July 21. COT reports (analysis of yesterday's trade). Bears failed to maintain

To open long positions on GBP/USD, you need:

The British pound significantly strengthened its positions yesterday. After breaking through the rather important resistance of 1.2618, GBP/USD continued to grow with renewed vigor, as the bearish trend was completely broken, which forced speculators to close short positions. If you look at the 5-minute chart, you will see how several signals were formed to buy the pound. It was quite difficult to determine the pound's direction in the European session after updating the resistance of 1.2571, but then the buy signal was obvious closer to the beginning of the US session. The breakout and consolidation above the level of 1.2618, followed by its top-down test, became a good entry point into long positions, which led GBP/USD to the resistance area of 1.2668, which will be the focus of buyers today. Another increase in short and long positions was recorded in the Commitment of Traders (COT) report for July 14, which indicates a confrontation between buyers and sellers. However, there were many more bulls than sellers, which caused the net position to decrease. This does not mean that the market has become bullish, since there is still a fairly high probability of the pound's decline amid Brexit uncertainty and other economic problems. However, signals to change the trend are coming more and more often, especially given the fact that the bulls managed to break the bearish formation formed on July 9. The COT report indicates that short non-commercial positions increased from the level of 56,300 to the level of 56,761 during the week. During this time, long non-commercial positions rose from the level of 39,892 to the level of 43,175. As a result, the non-commercial net position decreased its negative value to -13,568 against -16,408, which indicates that the market is still under pressure, but there are fewer that are willing to sell. As for the current situation in GBP/USD, the main focus of buyers today in the morning will be at 1.2668, since a return to it and consolidating above will be another signal to open long positions in the pound in order to continue the bullish momentum to the high of 1.2742 and 1.2809, where I recommend taking profits. If buyers are not able to take advantage of the lack of important fundamental data, and the UK only has a report on public sector borrowing today, then it is best to look at long positions only after a downward correction to the support area of 1.2618, provided that a false breakout is formed there, or buy GBP/USD immediately on a rebound from the low of 1.2571 with the goal of an upward correction of 30-40 points within the day.

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To open short positions on GBP/USD, you need:

Sellers of the pound need to consolidate below 1.2668 and test it from the bottom up with the condition that a false breakout is formed there. It is very dangerous to trade against a new trend, so if you are not sure of the entry point, it is better to wait for the pound to grow to a larger high of 1.2742 and open short positions from there immediately for a rebound, counting on a correction of 30-40 points within the day. The pressure on the pound could increase if the bears manage to stay below the 1.2668 level, which will push it to the support of 1.2618, where the moving averages are already located. But the long-term goal for short positions are lows of 1.2571 and 1.2517, where I recommend taking profits. Updating these areas will also hit the mood of buyers of the pound hard, as it will lead to locking the pair in the side channel.

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Indicator signals:

Moving averages

Trading is conducted above 30 and 50 moving averages, which indicates that buyers are returning the market under their control.

Note: the period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.

Bollinger Bands

A break in the lower border of the indicator at 1.2618 will increase the pressure on the pound. Breaking the upper limit of the indicator in the area of 1.2690 will lead to a larger increase in the pound.

Description of indicators

  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
  • MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Fast EMA period 12. Slow EMA period to 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
  • Non-commercial traders are speculators, such as individual traders, hedge funds, and large institutions that 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 short and long positions of non-commercial traders.
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