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Expert In



GBP/USD: plan for the European session on May 26. COT reports (analysis of yesterday's trade). Pound buyers gradually returning

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

The British pound was in a narrow side channel yesterday amid the lack of important macroeconomic statistics, as well as a low trading volume due to the holiday in the United States. Bears' attempt to break below support 1.2162 in the morning led to a small increase, which remained today at the Asian session, thereby, causing a new level of support to form. The Commitment of Traders (COT) for May 19 recorded a sharp increase in both short and long positions, which indicates the players' interest in the British pound. However, the advantage remained on the side of sellers, even despite its major decline, which has been observed since the beginning of May 2020. However, medium-term buyers are also attracted by rather interesting lows, to which GBP/USD updates every time upon the release of negative news on the state of the UK economy. The COT report indicated that short non-profit positions increased to 54,799 from 45,213 during the week, while long non-profit positions also increased, from 31,525 to 35,820. As a result, the non-profit net position became even larger negative and turned out to be –18,989 against –13,668, which so far indicates a bearish trend in GBP/USD. As for the intraday strategy, the bulls need to defend the support of 1.2198, which formed yesterday at the US session. A good signal to buy the pound will be for a false breakout to form on it along with a rebound from the moving average, which will lead to a larger upward momentum of the pair in the resistance area of 1.2245, where buyers could face difficulties. Consolidating on this range will lead to a larger upward trend to the area of a high of 1.2293, where I recommend taking profits. In case the pound declines to the 1.2198 level in the morning, and the market is still on the side of the pound sellers, it is best to open long positions from the support of 1.2162 after forming a false breakout, since this will be the fifth test in this account, and it is unlikely for the bulls to protect it, as before. It is best to buy GBP/USD immediately for a rebound from a low of 1.2122 or from a larger support in the region of 1.2074, counting on a correction of 30-40 points within the day.

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

Pound sellers urgently need to return the market to their control, and this can only be done after consolidating under intermediate support of 1.2198, which will increase the pressure on the pair and will definitely lead to the next test of the lower border of 1.2162. It will be possible to talk about resuming the downward trend after a breakout of support 1.2162, which will quickly push GBP/USD to May lows in the areas of 1.2122 and 1.2074, where I recommend taking profit. If the bulls turn out to be stronger in the morning, then maintaining control over the 1.2198 level may lead to a resistance test of 1.2245. It is best to open short positions from there after forming a false breakout, which will clamp the pound in the new side channel of 1.2162-1.2245. I recommend selling immediately for a rebound only after updating a larger high in the region of 1.2293, counting on a correction of 20-30 points by the end of the day.


Signals of indicators:

Moving averages

Trading is slightly above 30 and 50 moving averages, which indicates a possible slowdown of the bear market in the short term.

Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differs from the general definition of the classic daily moving averages on the daily chart D1.

Bollinger bands

A break of the upper border of the indicator in the region of 1.2215 will lead to a new wave of pound growth. In case of a fall, a breakthrough of the lower border of the indicator in the region of 1.2170 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. The graph is marked in yellow.
  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
  • MACD indicator (Moving Average Convergence / Divergence - moving average convergence / divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
  • Non-profit traders are speculators, such as individual traders, hedge funds and large institutions that use the futures market for speculative purposes and meet certain requirements.
  • Long nonprofit positions represent the total long open position of nonprofit traders.
  • Short nonprofit positions represent the total short open position of nonprofit traders.
  • The total non-profit net position is the difference between the short and long positions of non-profit traders.
The material has been provided by InstaForex Company -