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Expert In



GBP/USD: plan for the European session on August 18. COT reports (analyzing yesterday's trades). Pound remains in a sideways

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

Nothing changed during the day from a technical point of view, except a signal to buy formed yesterday afternoon. If you look at the 5 minute chart, you will see how a good long entry point was formed after an update of the 1.3074 support, which I paid attention to in my review. After that, a return to the resistance area of 1.3139 took place, and the movement was around 60 points. The report from the futures market also shows that the demand for the pound is growing and the tipping point is about to come when the net position becomes positive.

The Commitment of Traders (COT) reports for August 11 recorded an increase in long positions, as well as a reduction in short ones. This suggests that, even despite the differences that exist with the EU on the trade deal, recent macroeconomic indicators make us believe in a more active recovery of the UK economy after the pandemic crisis, as well as the pound's growth in the medium term. The COT report indicates that short non-commercial positions decreased from the level of 60,704 to the level of 59,874 during the week. On the contrary, long non-commercial positions increased from the level of 45,977 to the level of 48,053. As a result, the non-commercial net position again decreased its negative value to -2,821, against -14,727. This suggests that the market trend is about to change in the near future and control will go to the side of buyers of the pound in the medium term.

As for the current picture, it has not changed much compared to yesterday's forecast. The bulls need to break above the resistance of 1.3139, since it currently depends on it – whether the upward trend on the pound continues, or the pair hovers in the side channel, which it has been in since the end of last week. Settling above 1.3139 forms a good entry point into long positions in anticipation of updating the high of 1.3181. The resistance of 1.3228 is the long-term goal, where I recommend taking profits. In case the pound falls in the first half of the day, it will be possible to return to long positions on a false breakout from the support at 1.3074, and in the absence of activity, I recommend postponing new long positions until the lower border of the wider side channel near 1.3007 is updated, counting on a correction in 30-40 points within the day.

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

In order to somehow change the current situation on the market, sellers need to break below the support of 1.3074, since settling under this level will be a good signal for further opening of short positions in the hope of pulling down the pair to a low of 1.3007. A break in the support of 1.3074 will also lead to a break in the lower border of the current ascending channel, which buyers of the pound have been trying to form since the middle of Friday last week. The low at 1.2916 is still the long-term goal of the bears, which is where I recommend taking profits. An equally important problem for the bears is protecting the 1.3139 resistance, which is now the main trading area. Everything can happen according to yesterday's scenario: an attempt to break 1.3139, update the high from August 14 and return the pair to this level. All this forms a good signal to open short positions in anticipation of a decline to the middle of the 1.3074 side channel. If there is no activity at this level, I recommend selling the pair immediately for a rebound only after updating the resistance of 1.3181 in anticipation of a correction of 30-40 points.

Indicator signals:

Moving averages

Trading is carried out slightly above 30 and 50 moving averages, which indicates that traders are still willing to buy the British pound.

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

Bollinger Bands

A breakout of the upper border of the indicator around 1.3139 will lead to a new wave of growth in the pound. In case of decline, support will be provided by the lower border at 1.3080.

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.
The material has been provided by InstaForex Company -