Trading plan for the GBP/USD pair for the week of December 28-31. COT report (Commitments of Traders). A deal has been reached,

GBP/USD - 24H.


The GBP/USD currency pair continued to be in storm mode this week. The volatility of the pound on days this week totaled 311 points. Thus, the pound traded very actively, which is not surprising, as earlier in the week, the markets rocked by news of a new strain of "coronavirus" which started to hit the UK, which has announced stricter quarantine, and closer to the end of the week it became known that London and Brussels had come to an agreement on the trade deal. Thus, at the beginning of the trading week, the pound fell heavily, however, after a couple of days, it rose again to its 2.5-year highs and closed the week near them. Therefore, at the moment, there is no technical reason to assume that the upward trend is completed or is nearing its end. The fundamental background continues to send the pair down 500-600 points, even despite the conclusion of a trade agreement. After all, before that, the pound was growing. The euro was also growing, thus, we can assume that the problem was low demand for the US dollar. However, the pound has also felt unnecessarily good in recent months. Undeservedly good. Thus, we still expect the beginning of a new downward trend and still recommend that you first wait for technical confirmation of this hypothesis and only then consider trading on the downside.

COT report.


During the last reporting week (December 8-14), the GBP/USD pair increased by 80 points. Small price changes, however, the overall upward trend for the pound remains. But the latest COT report again gave us data that does not allow us to draw any specific conclusions and forecasts. The changes were again minimal and contradictory. Professional traders closed 4 thousand buy-contracts and 2.3 thousand sell-contracts during the reporting week. Thus, the net position of the most important group of traders decreased by 2.3 thousand, which is not much. This means that the mood of major players has become more "bearish". However, it is best to pay attention to the first indicator now to understand what is happening with the mood of non-profit traders. The green line (as well as the red one) constantly changes the direction of movement: up and down. This indicates the lack of a clear and firm attitude of the "Non-commercial" group. Thus, now it is impossible to draw any conclusions at all. The pound has continued to grow for three months (and this is only the last round of its upward movement), however, COT reports do not say that at this time the mood among non-profit traders became more "bullish". Or even that any group of traders at this time actively increased purchases of the pound. The new COT report on Friday did not come out because of the Catholic Christmas.

The fundamental background for the GBP/USD pair this week was extremely strong. It is hard to believe that the epic of trade negotiations ended positively for both sides. It seems that both London and Brussels will continue to trade with each other without quotas and duties after the end of Brexit on December 31, 2020, and this is certainly great news for both Europeans and Britons. The case remains small. It is necessary that the European and British parliaments now have time to ratify the agreement reached. It is already known that the British Parliament will meet for an emergency meeting on December 30, and the European Parliament next year, but the deal will still come into force on the European side, thanks to the special powers of the European Council, which is likely to introduce it for "temporary use". That is, in fact, it will approve it "retroactively". However, many experts are still skeptical about the prospects of the British economy. In principle, it was known even before the deal was concluded that the British economy would suffer greatly from Brexit in any case (and it began to suffer losses 4 years ago), but with a trade deal, these losses will be less. Now it remains only to understand what the economic losses from Brexit will be. In the fourth fiscal quarter, the British economy is likely to contract again due to a "lockdown" in November-December and the quarantine due to a new strain of "coronavirus" in December. Therefore, we still expect the British pound to fall.

Trading plan for the week of December 28-31:

1) The price maintains the upward trend without any problems and worked out the first resistance level of 1.3526 for the second time. Thus, in the 24-hour timeframe, the next target for an upward movement is the level of 1.3734. We recommend that you continue to consider options for opening long positions on lower timeframes and do not try to guess the end of the upward trend.

2) Sellers are still quite weak. This week, the bears tried to seize the initiative, however, it all ended in another failure. Thus, for the possibility of opening short positions, it is now recommended to wait again, at least, for the price to consolidate below the critical line. If this condition is met, a downward trend may form on the 4-hour timeframe.

Explanation of the illustrations:

Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.

Ichimoku indicators, Bollinger bands, MACD.

Support and resistance areas – areas from which the price has repeatedly bounced.

Indicator 1 on the COT charts – the net position size of each category of traders.

Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.

The material has been provided by InstaForex Company -