FX.co ★ GBP/USD: trading plan for the American session on April 19 (analysis of morning trades)

In my morning forecast, I focused on the level of 1.2412 and recommended making decisions about entering the market from there. Let's look at the 5-minute chart and figure out what happened there. The decline and formation of a false breakout around 1.2412 after the release of inflation data in the UK allowed for an excellent entry point for long positions, resulting in a pound surge of more than 50 points. The technical picture is completely revised for the second half of the day.

To open long positions on GBP/USD, it is required:

Considering the high volatility of the pair, I had to slightly revise my position on increasing long positions. Protecting 1.2398 is now the main priority for buyers, as losing this level could mean saying goodbye to the short-term upward trend. As nothing is planned for the second half of the day except for the publication of the Fed's regional economic review, the "Beige Book," the bulls have every chance to maintain growth. A decline and formation of a false breakout at 1.2398, where the moving averages supporting the bulls are located, will allow for an entry point for long positions with the prospect of a surge towards the new resistance at 1.2445, which formed during the first half of the day. Controlling these levels will be quite an important task, so a breakthrough and consolidation above this range will create an additional signal to buy the pound with a movement towards 1.2480. The ultimate target will be the 1.2519 area, where I will fix the profit. In the scenario of a decline of around 1.2398 and the absence of activity from the bulls, it is best not to rush with purchases. In this case, I will open long positions only on a false breakout around the next support at 1.2353. I plan to buy GBP/USD immediately on the rebound from the minimum of 1.2310 with the aim of a 30-35 point correction within the day.

To open short positions on GBP/USD, it is required:

Sellers have recovered from the market reaction to maintaining high inflation in the UK, but determining the further direction is quite difficult. I will only act on a false breakout around 1.2445, similar to what I analyzed above for the buy signal. This will give a chance for a larger pound movement with the prospect of updating the new support at 1.2398, which formed in the first half of the day. A breakthrough and reverse test from the bottom to the top of this range after the speech of the Bank of England representatives will increase pressure on GBP/USD, forming a sell signal with a drop to 1.2353. The ultimate target remains the minimum of 1.2310, where I will fix the profit. In the case of GBP/USD growth and the absence of activity at 1.2445 in the second half of the day, which is also quite likely, it is best to postpone sales until the test of the next resistance at 1.2480. Only a false breakout will provide an entry point for short positions. If there is no downward movement, I will sell GBP/USD on the rebound immediately from the maximum of 1.2519, but only with the expectation of a pair correction downwards by 30-35 points within the day.

The COT report (Commitment of Traders) for April 11 showed an increase in long positions and a reduction in short positions. The market liked the GDP growth rate data for the UK as a whole, so demand for the pound remained even despite the downward correction of the pair, which had been expected for quite some time. Given that the aggressive policy of the Federal Reserve is coming to an end, and the Bank of England has no choice but to continue raising interest rates to fight double-digit inflation, demand for the pound is expected to remain. The correction will be a good reason to enter into long positions. The latest COT report shows that non-commercial short positions decreased by 3,882 to 57,326, while non-commercial long positions jumped by 8,513 to 54,928. This led to a sharp reduction in the negative value of the non-commercial net position to -2,398, compared to -14,793 the previous week. The reduction has been happening for the third week in a row, which also confirms the bullish nature of the market. The weekly closing price decreased and amounted to 1.2440, compared to 1.2519.

Indicator signals:

Moving Averages

Trading is carried out in the area of the 30- and 50-day moving averages, indicating market uncertainty.

Note: The author considers the period and prices of the moving averages on the hourly chart H1, which differ from the general definition of classical daily moving averages on the daily chart D1.

Bollinger Bands

In case of a decline, the lower boundary of the indicator at around 1.2398 will act as support.

Description of indicators:

• Moving Average (determines the current trend by smoothing volatility and noise). Period 50. Marked on the chart in yellow.
• Moving Average (determines the current trend by smoothing volatility and noise). Period 30. Marked on the chart in green.
• MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages). Fast EMA period 12. Slow EMA period 26. SMA period 9.
• Bollinger Bands. Period 20.
• Non-commercial traders - speculators, such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting 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.
• The total non-commercial net position is the difference between non-commercial short and long positions.