GBP/USD: plan for the European session on March 23. COT reports. Pound bulls managed to protect support at 1.3820, but growth

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

Nothing interesting happened yesterday morning. Several entry points were formed, from which decisions on entering the market were made. Let's look at the 5-minute chart and analyze the deals: you can see how the bulls failed to rise above 1.3859, afterwards it was tested once again, which formed a false breakout and generated a signal to open short positions. However, there was no good movement further down the trend. By the middle of the day, the bulls still managed to breakthrough and settle above resistance at 1.3859, afterwards this level was tested from top to bottom. However, it was impossible to open long positions there during the upward correction. I have highlighted an area on the chart where you could clearly see that the 1.3859 level was tested and broken down from the top, which negates all the bulls' plans for a rapid continuation of the pound's growth.

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Trading became more productive in the afternoon once the levels were revised. I advised you to open long positions after forming a false breakout in the support area of 1.3820. The chart clearly shows how the bears failed to surpass this range, which creates an excellent entry point into long positions. As a result, the upward movement amounted to more than 50 points.

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Before examining the technical picture of the pound, let's take a look at what happened in the futures market. The pressure on the pound continues to persist. Since the beginning of March, the bulls have been unable to cope with the resistance of 1.4000, which each time leads to a large sale of the pound. The Commitment of Traders (COT) report for March 15 revealed a reduction in both short and long commercial positions. Once again, the closing of long positions became quite strong, which led to a reduction in the positive delta. The main problem for risky assets, which can be attributed to the pound, is still the growth in the yield of US bonds, which provides serious support to the dollar. However, in the medium term, buyers of the pound will certainly take advantage of this moment to enter the market at more attractive prices, since a good vaccination program will allow more active quarantine measures to be phased out. In the future, this will lead to a major growth in the economy, which will increase inflationary pressures and make the Bank of England seriously think about phasing out stimulus measures and raising interest rates. Expectations of such decisions will have a positive effect on the pound, which will lead to its growth. Long non-commercial positions declined from 61,271 to 55,190. At the same time, non-commercial short positions fell from 27,360 to 26,590, indicating a possible succeeding decline for the pair. As a result, the non-commercial net position fell to 28,600 from 33,911 a week earlier. The weekly closing price remained practically unchanged and reached 1.3898 against 1.3821. The observed downward correction in the pound will attract new buyers.

Quite a lot of important fundamental reports on the UK will be released today: in the morning we have reports on the changes in the number of applications for unemployment benefits and the overall unemployment rate in the UK. This will be followed by BoE Chief Economist Andy Haldane and the BoE Deputy Governor for Financial Stability Jon Cunliffe. All this can lead to a surge in the pound's volatility. As for the technical picture, the initial task is to return and settle at resistance at 1.3870, which was not done yesterday afternoon. Moving averages, playing on the side of the sellers of the pound, also pass slightly above this level. Surpassing this range and testing it from top to bottom will result in creating an excellent entry point into long positions in order to push GBP/USD to rise to the 1.3914 area, where I recommend taking profits. The next target will be 1.3953, however, we can only expect such a powerful upward momentum if we receive good reports. In the event of a downward correction in GBP/USD this morning, it is best not to rush into long positions, but to wait for a false breakout in the 1.3820 area, from which we already opened longs yesterday. If bulls are not active then I recommend waiting for the 1.3776 low to be tested and buy the pound from there on a rebound, counting on an upward correction of 25-30 points within the day. The more the pound falls, the more attractive it is for new buyers.

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

The pair's succeeding direction will depend on how the labor market report turns out. Bears will have control of the market as long as trading is below the resistance of 1.3870, forming a false breakout there in the first half of the day, and this moment may coincide with the release of reports, will return pressure to the pair and lead to forming a new downward movement to the support area of 1.3820, below which we did not manage to surpass yesterday. Only a breakthrough of this level with a reverse test from the bottom up can create an additional entry point into short positions for the purpose of pulling down GBP/USD to a low like 1.3776, where I recommend taking profits. The next major support level is seen around 1.3733. In case the pair grows during the European session and bears are not active in the resistance area of 1.3870, then I recommend not to rush to sell. It is best to wait until the 1.3914 high has been updated and open short positions from there immediately on a rebound with the aim of a downward correction of 30-35 points within the day. The next big resistance is seen only in the 1.3953 area from which you can act in a similar way.

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Indicator signals:

Moving averages

Trading is carried out below 30 and 50 moving averages, which indicates that the pair's downward correction will continue.

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 lower border of the indicator around 1.3820 will increase the pressure on the pound. A breakout of the upper border of the indicator in the area of 1.3870 will lead to an upward correction for 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.
The material has been provided by InstaForex Company - www.instaforex.com

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