GBP/USD: plan for the European session on August 21 (analyzing yesterday's trades). Pound making a crazy return to monthly

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

Quite a lot of interesting entry points to long positions in the British pound were formed yesterday. The very first purchases I considered in my yesterday's review for the afternoon. Now let's see where it was possible to enter the market during the US session and what came out of it. On the 5-minute chart, you can see how the bulls are trying to gain a foothold above the 1.3126 resistance and there seems to be an increase of 20 points from this level, but then the momentum slowed down and buyers leave the market. I also paid attention to this scenario yesterday and I think many people were ready for it. Purchases on the repeated test of 1.3075 support allowed a good entry into the market. But on the chart, you can see that the pair fell just a couple of points short of 1.3075. For those who did not enter into purchases from this area, and I think there were many of them, another good entry point was formed after settling above the resistance of 1.3126. As a result, the pound shot another 40, and then another 50 points up. The bulls are currently focused on updating this week's high around 1.3260. However, consolidating above this range is a buy signal, since it is a bad idea to buy on a breakout near the high. We can only expect the pound to continue growing towards the 1.3316 and 1.3375 areas after good data on UK retail sales and the PMI index, where I recommend taking profits. In case GBP/USD falls in the first half of the day, you can consider buying if a false breakout forms in the 1.3223 area. But I recommend postponing larger long positions immediately on a rebound until lows of 1.3185 and 1.3135 have been tested, based on a correction of 30-40 points within the day.

Let me remind you that the Commitment of Traders (COT) report for the previous week showed a reduction in short non-commercial positions from the level of 60,704 to the level of 59,874. 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 decreased its negative value again to -2,821, against -14,727. This suggests that the market trend is about to change in the near future and buyers of the pound will gain control in the medium term.

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

Sellers of the pound will primarily focus on protecting the resistance of 1.3260. A false breakout there, along with weak data on PMI indices, will form a signal to open short positions in anticipation of a return to the support of 1.3223. Under this condition, it will be possible to add to short positions only after consolidating below the 1.3223 level, counting on the renewal of the low of 1.3185, where I recommend taking profits, since the moving averages are concentrated in this range, which will not allow the price to go down so easily. In case the pound grows further above the resistance of 1.3260, it is best to postpone short positions until the high of 1.3316 has been updated, or sell GBP/USD immediately on the rebound from the resistance of 1.3375, based on a correction of 30-40 points within the day.

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Indicator signals:

Moving averages

Trading is already underway above 30 and 50 moving averages, which indicates a return to the market of buyers of the 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

Growth will be limited by the upper level of the indicator around 1.3280. In case of a decline, support will be provided by the average border of the indicator at 1.3190.

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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