GBP/USD: plan for the European session on September 25. COT reports. Trading in a horizontal channel, but this has its advantages

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

Trading remained in a horizontal channel at the end of Thursday, which led to forming a fairly large number of signals to enter the market. Let's take a look at the 5-minute chart and analyze all the entry points. I think many of you have read yesterday's review, where I analyzed buy positions for the pound, which were from the 1.2709 level in the morning. Let me remind you that after the pair returned to this range, testing it from top to bottom caused the pound to sharply rise to a high of 1.2772, where I advised you to open short positions immediately on a rebound. The first downward movement from this level was around 40 points. But the sell signal from 1.2772 became more interesting after returning and testing this level in the afternoon. Forming the next false breakout produces an excellent entry point for short positions, which brought GBP/USD back to the 1.2709 area by the middle of the US session, which is where I also advised you to take a closer look at long positions. An unsuccessful breakout of 1.2709 and another signal to buy the pound sharply rising to the 1.2772 area, where it was possible to sell the pound along the trend again. In any case, you should have taken at least some of these movements, since the pair was providing excellent signals.

Bulls currently need to defend the 1.2709 level, since quite a lot depends on it. Forming a false breakout at the1.2709 level will be a signal to open long positions while expecting an upward correction to the resistance area of 1.2772, similar to yesterday. However, you can only count on successive growth if we receive positive dynamics in Brexit, since today's fundamental data on UK lending is unlikely to be able to provide support for the pound. You can also count on settling above 1.2772, which will be an excellent entry point into long positions in GBP/USD with the main task of recovering to a high of 1.2816. A large resistance at 1.2863, will be a distant target, which is where I recommend taking profits. In case the pair falls below the 1.2709 level, and this is more likely, it is best not to rush to buy the pound, but wait until the next low of 1.2645 has been updated, or buy GBP/USD even lower, immediately on a rebound from support at 1.2585, counting on a correction of 30- 40 points within the day.

Let me remind you that the Commitment of Traders (COT) reports for September 15 showed a reduction in long positions and a large increase in short positions, which indicates market expectations and a high possibility that the pound will fall in the long term, which is probably due to uncertainty regarding the conclusion of the Brexit trade deal. And if last week, it was possible to say that the downward momentum may start to gradually slow down, which the market showed us, now the situation is on the side of the pound sellers once again and the pair may succeedingly fall. Short non-commercial positions increased from 33,860 to 41,508 during the reporting week. Long non-commercial positions decreased from 46,590 to 43,801. As a result, the non-commercial net position sharply fell to 2,293, against 12,730, a week earlier.

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

Today is a fairly empty news day for the British pound, so don't be surprised if trading continues in a horizontal channel. Expectations regarding the introduction of negative interest rates, Brexit and the rise of coronavirus-infection - all this plays on the side of the pound sellers. Bears need a breakout of support at 1.2709 in the first half of the day, settling below it opens a direct way for the pound to move to a low of 1.2645, while the 1.2585 level will be a distant goal, which is where I recommend taking profit. In the event of an upward correction in GBP/USD, I recommend not to rush to sell, but wait until a false breakout forms in the resistance area of 1.2772, similar to yesterday. It is possible to open short positions immediately on a rebound from a larger resistance in the 1.2816 area, counting on a correction of 30-40 points within the day.

Indicator signals:

Moving averages

The trade is in the 30 and 50 moving averages, which indicates some form of market pause in the bearish movement.

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 daily D1 chart.

Bollinger Bands

A breakout of the lower border of the indicator in the 1.2720 area will lead to a new wave of decline for the pound. The breakout of the upper border in the 1.2765 area will lead to a new wave of growth for 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) Quick EMA period 12. Slow EMA period to 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
  • Non-commercial speculative traders, 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.
  • Total non-commercial net position is the difference between short and long positions of non-commercial traders.
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