In the morning review, we focused on the level of 1.2177 and considered entering the market there. Let's take a look at the M5 chart to get a picture of what happened. Growth and a false breakout through the mark, following the bears' attempts to reach the weekly low, produced a sell signal. The price has already fallen by 40 pips. In the course of the North American session, the situation on the chart may change dramatically. Therefore, let's adjust our trading plan.
When to go long on GBP/USD:
Data on the US housing market may either boost the greenback or the pound, depending on the outcome. A fall in building permits and new home sales may push the pair up to the resistance level of 1.2160. Meanwhile, an increase in the figures may contribute to a decrease in the pair's value to 1.2092 where bullish pressure may intensify. Therefore, it will be wiser to buy the instrument after a false breakout through 1.2092, with the target at 1.2160. Another buy signal will be made after the price tests this range to the downside. The target will stand at 1.2232, in line with the updated upper limit of the sideways channel. A breakout through the mark will produce a buy signal with the target at the high of 1.2301 where it is wiser to lock in profits. If the bulls lose control over the mark of 1.2092, the bears will tighten their grip on the market. In such a case, it will become possible to buy the instrument after a false breakout through 1.2009. Long positions could also be opened on a rebound from 1.1954 or 1.1904, allowing a correction of 30 to 35 pips intraday.
When to go short on GBP/USD:
A false breakout through 1.2160 resistance, which is in line with moving averages and the new middle of the sideways channel, will generate a sell signal. The pair may then go to the low of 1.2092. A breakout through the mark and its retest to the upside will make an additional sell signal. The bears may then push the pair to 1.2009. In case of a breakout and a retest of the level to the upside, the quote may fall to 1.1954 where it is wiser to lock in profits. If the price does not plummet from the level of 1.2160, and data on the US housing market misses economists' expectations, the bulls will try to regain control over the market, and the quote will rally to 1.2232.
Commitments of Traders:
The COT report for December 13th logged a rise in long and short positions. Given that the number of long positions exceeds that of short positions, the pair is now facing strong buying pressure. In fact, traders are ready to buy the pair at the current high price. Last week, the Bank of England announced it would continue hiking rates to fight stubborn inflation, which slowed down a bit last month. The regulator's current policy makes experts think that the UK economy is in a recession. Therefore, the pair's growth potential is likely to be limited. For that reason, it is wiser to wait for a downward correction in order to buy the instrument. According to the latest COT report, short non-commercial positions rose by 1,015 to 57,747 and long non-commercial positions grew by 3,469 to 32,008. Consequently, the non-commercial net position came in at -25,739 versus -28,193 a week ago. The weekly closing price of GBP/USD increased to 1.2149 versus 1.1958.
Indicator signals:
Moving averages
Trading is carried out in the range of the 30-day and 50-day moving averages, reflecting a sideways trend in the market.
Note: The period and prices of moving averages are viewed by the author on the hourly chart and differ from the general definition of classic daily moving averages on the daily chart.
Bollinger Bands
Resistance stands at 1.2180, in line with the upper band.
Indicator description:
- Moving average (MA) determines the current trend by smoothing volatility and noise. Period 50. Colored yellow on the chart.
- Moving average (MA) determines the current trend by smoothing volatility and noise. Period 30. Colored green on the chart.
- Moving Average Convergence/Divergence (MACD). Fast EMA 12. Slow EMA 26. SMA 9.
- Bollinger Bands. Period 20
- Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements.
- Long non-commercial positions are the total long position of non-commercial traders.
- Non-commercial short positions are the total short position of non-commercial traders.
- Total non-commercial net position is the difference between the short and long positions of non-commercial traders.
