I focused on the level of 1.2161 in my morning forecast and suggested making decisions about joining the market there. Let's analyze the 5-minute chart to see what transpired there. Around the start of the European session, the rise and construction of a false breakdown at 1.2161 gave us a sell signal, which caused the pound to decline by more than 35 points. We fell short of the crucial support level of 1.2100, though. Since not much happened throughout the second half of the day, I did not adjust my plan.
You require the following to open long positions on the GBP/USD:
Although buyers of the pound are still aggressively trading near 1.2161, it has not yet been possible to seize on this range in any way. Since there are no significant US numbers in the afternoon, sellers may have an advantage, which will cause the pound to correct downward. Therefore, it is advised not to make hasty purchases near 1.2161. I recommend keeping an eye out for the pair to weaken and for the appearance of a false breakdown near the new morning support level of 1.2100. Only this will provide a buy signal to keep the new upward trend going and enable you to go back to 1.2161 and break beyond this range. The sellers' stop orders will be struck by a breakthrough and top-down test of 1.2161, which will trigger a buy signal and a more abrupt upward move at the start of the week with the update of 1.2219, from where the pound aggressively declined in mid-December. A similar challenge and an exit above 1.2219 will open significant growth opportunities above 1.2260, where I advise setting profits. The region of 1.2301 will be a further objective. The demolition of buyers' stop orders posted below will occur if the bulls are unable to complete the duties assigned and miss 1.2100, which is still some distance away. However, the pressure on the pair will only marginally increase in this scenario. It is recommended to start long positions on a downturn and a false breakdown in the vicinity of the next minimum of 1.2037, where the moving averages are siding with the bulls. For this reason, I suggest you not hurry into purchases. I advise purchasing GBP/USD right away in anticipation of recovery from 1.1982 to gain 30-35 points in a single day.
You require the following to open short positions on the GBP/USD:
Bears are vigorously defending 1.2161; if there is another false breakdown, you can sell the pair by drawing a comparison with the signal I just reviewed. The pressure on the pound will continue while trade is done below 1.2161. However, another upward surge will take place if the bears miss this range, so keep an eye on what's going on. Also, keep in mind that the likelihood of another upward move for the pair increases the longer there is no downward movement from 1.2161. The immediate objective of the sellers is to maintain 1.2100. With a rise to 1.2037 and the potential for updating 1.1982, where I advise fixing profits, only a breakthrough and a reversal test from the bottom up of this range will provide an entry opportunity to sell. Buyers of the pound will sense its strength with the possibility of GBP/USD growth, the absence of bears above 1.2161, and everything moving in this direction in the afternoon, which, as I said above, will cause a sharper upward move of the pair. In this instance, the only entry opportunity into short positions with the intention of a new downward movement is a false breakout in the vicinity of the next resistance level of 1.2219. If there is no activity there, I urge you to sell GBP/USD right away at the highest price of 1.2260, but only if you are counting on the pair to fall back by 30-35 points over the day.
There were more long holdings and fewer short ones in the COT report (Commitment of Traders) for December 20. It was made obvious after important central bank meetings that authorities will keep raising interest rates and tightening monetary policy, which by all logic should increase demand for national currencies, including the British pound. The report makes clear exactly how things stand. However, it is unlikely that traders will continue to buy the pound with the same zeal in January given that the GDP numbers for the UK's third quarter were revised in the direction of a larger decline and the start of the recession is not an expectation for next year but rather this year's reality. According to the most recent COT report, long non-commercial positions increased by 3,276 to a level of 35,284 while short non-commercial positions decreased by 16,860 to a level of 40,887. As a result, the non-commercial net position's negative value decreased to -5,603 from -25,739 the previous week. In comparison to 1.2377, the weekly ending price dropped to 1.2177.
Signals from indicators
Moveable Averages
Trading is taking place above the 30 and 50-day moving averages, which suggests that the pair will continue to increase.
Note that the author's consideration of the period and costs of moving averages on the hourly chart H1 differs from the standard definition of the traditional daily moving averages on the daily chart D1.
Bands by Bollinger
The indicator's upper bound in the vicinity of 1.2161 will serve as a barrier in the event of expansion.
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 speculative traders, such as individual traders, hedge funds, and large institutions use the futures market for speculative purposes and to 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 the short and long positions of non-commercial traders.
