BP/USD: plan for the European session on December 16. COT reports. Buyers' optimism may lead to renewing the 1.3534 high

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

I analyzed several good signals for entering the market in my afternoon forecast. The US session was also quite interesting, producing four more signals. Let's sort them all out with you. The 5-minute chart shows how the bears are protecting resistance at 1.3340 in the first half of the day and testing it from the bottom up produces a good sell signal, which was immediately realized in the support area of 1.3290, bringing around 50 points of profit. Then the attention shifted to a false breakout of support at 1.3290, where I recommended opening long positions immediately on a rebound. I marked the area on the chart, an excellent entry point to buy the pound appeared after it was tested from top to bottom. As a result, the upward movement was 50 points, but the bulls were not going to stop there. Buyers of the pound hoped to return to the 1.3340 level, however, this area was not tested from top to bottom and it would be logical to miss this signal. After growing further, a false breakout of the 1.3388 level led to a small correction by 20 points, afterwards the bulls returned to the market and produced a good point to buy after a breakout and surpassing the 1.3388 level. I marked it on the chart. Rising from 1.3388 led to a renewal of the 1.3437 high, where it was necessary to sell the pound immediately on a rebound in order to correct by 20-30 points, which happened.

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Bulls must maintain control over the 1.3437 level, as the upward trend depends on it. Forming a false breakout there in the first half of the day will be an excellent signal to open long positions in hopes for the pound to recover in the short term. In this case, the goal is for a breakout and being able to surpass resistance at 1.3489, testing it from top to bottom, produces an additional entry point into long positions and an exit to a high of 1.3534, where I recommend taking profits. The next targets are resistances 1.3604 and 1.3648, but they will only be available if we receive good data on the UK services and manufacturing sector, as well as good news on the Brexit deal. In case bulls are not active in the support area of 1.3437, it is best not to rush to buy, but to wait for the pair to fall and update the 1.3388 low. However, I recommend opening long positions from this level only after forming a false breakout. A larger support level is seen in the 1.3340 area, where you can buy GBP/USD immediately on a rebound, counting on a correction of 20-30 points.

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

Bears will focus on regaining control above 1.3437. Settling below this range and testing it from the bottom up produces a good signal to open short positions, in hopes for a downward correction to the support area of 1.3388, where the moving averages play on the side of the pound buyers. Surpassing this level produces a good signal to sell the pound in hopes for it to fall to a low of 1.3340, where I recommend taking profits. Bad news on the trade deal will sharply pull down GBP/USD to lows of 1.3290 and 1.3246. If the pound continues to rise in the first half of the day after good reports on the state of the manufacturing and services sectors, then the bears should not rush to short positions. The optimal scenario for selling the pound will be failure to surpass 1.3489 and forming a false breakout there. I recommend selling GBP/USD immediately on a rebound from the high of 1.3534, or even higher, from the new large resistance at 1.3604, counting on a downward correction of 25-30 points within the day.

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The Commitment of Traders (COT) reports for December 8 notes significant interest in the British pound. Long non-commercial positions rose from 37,087 to 39,344. At the same time, short non-commercial positions decreased from 44,986 to 33,634. As a result, the non-commercial net position became positive and jumped to 5,710 against a negative value of -7,899 a week earlier. All this suggests that traders are ready to bet on the pound's succeeding growth at the beginning of 2021 and on the buyers' advantage in the current situation even when there is no trade deal at the moment, and take note that there is just around two weeks left until the end of the year.

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates that the pound will continue to recover in the short term.

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 break of the middle border of the indicator around 1.3375 will increase the pressure on the pound. Growth will be limited by the upper level of the indicator in the 1.3490 area.

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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