GBP/USD: plan for the European session on December 18. COT reports. Pound losing ground, as Brexit rumors turn out to be

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

Long deals on the pound in the first half of the day brought quite a lot of profit. The US session was more difficult. Let's take a look at the 5-minute chart and analyze all the entry points. In yesterday's forecast, I paid close attention to the 1.3550 level and advised you to open long positions from it. The chart clearly shows how the bulls surpassed 1.3550 and settled at this level, trading it from the other side. After that, GBP/USD grew, which made it possible to take more than 50 points of profit from the market. And in the afternoon, buyers were trying to pick up resistance at 1.3605, testing it from top to bottom, producing an entry point into long positions. But it did not rise, and the pair returned to the area below 1.3605. Sellers start to be active here. Updating the 1.3605 level, from the bottom up, produces an entry into short positions, afterwards the pair dropped more than 40 points. By the end of the day, the bulls returned the pound to 1.3605 and tried to gain a foothold there, but this led to another failure and a decline in the GBP/USD pair.

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All the support and resistance levels have been revised. Let's build on new guidelines. In the first half of the day, the main task of buyers will be to surpass and get the pair to settle above resistance at 1.3539. A downward test of this level produces a good signal to open new long positions in sustaining the pound's growth, which will allow the pair to return to monthly highs in the 1.3617 area. The bull market will depend on whether buyers manage to gain a foothold above this range. Surpassing 1.3617 would open a straight path to the 1.3690 and 1.3750 highs. But such a scenario will only be possible if there is real information that a Brexit trade deal can actually be concluded in the near future. Any unexpected negative statements in this regard could cause the pound to sharply fall. Therefore, if GBP/USD is still under pressure, I recommend taking a closer look at long deals from the 1.3448 level, provided a false breakout is formed there. It is possible to buy GBP/USD immediately on a rebound from the low of 1.3362, counting on a correction of 20-30 points within the day.

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

The bears are trying to regain control of the market and have cooled off the ardor of buyers at the end of Thursday. Pound sellers currently need a false breakout in the resistance area of 1.3539, which will confirm their intentions for a succeeding downward correction. In this scenario, there will be an opportunity for GBP/USD to fall to the 1.3448 low, where the bear market will first stop. Weak UK retail sales data will help sellers get to this level. The next target will be the 1.3362 area, but it will be available only when there is news that the parties are very far from signing a trade deal on Brexit. If we do not observe active sales from the 1.3539 level in the first half of the day, it is better not to go against the trend, but wait for an update of resistance at 1.3617, from where the pound can be sold, but only if a false breakout is formed there. Larger resistance levels, from which the pair can be sold immediately on a rebound, are seen in the areas of 1.3648 and 1.3698.

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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 in the area of 30 and 50 moving averages, which indicates the bears' attempt to seize the initiative.

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

If the pound rises, the upper border of the indicator at 1.3620 will act as a resistance. A breakout of the lower border of the indicator in the 1.3520 area will increase the pressure on the pair.

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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