FX.co ★ GBP/USD: trading plan for the US session on December 12th (analysis of morning deals). The pound reacted with a decline

In my morning forecast, I drew attention to the level of 1.2574 and recommended making entry decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The breakout and the reverse test of 1.2574 after the UK labor market data led to an entry point for short positions, resulting in a pair's decline of 25 points. We fell just a bit short of reaching 1.2538, so we couldn't get a suitable entry point there. The technical picture was reassessed for the second half of the day.

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

Considering the sharp decrease in average earnings in the UK, or to be precise, the slowdown in its growth, the pound reacted with a decline to these figures, as did the overall labor market report. This led to the pair being stuck in a sideways channel and a reassessment of the technical picture. In the second half of the day, important data on the Consumer Price Index will be released. While general inflation is somewhat understandable, core prices may demonstrate growth, which will be a problem for the Federal Reserve. An increase in prices in the US will trigger a rise in the US dollar and a fall in the British pound. But before buying around the local minimum of 1.2543, formed at the end of the first half of the day, it would be good to wait for the formation of a false breakout there. Only this will provide an entry point for long positions to restore GBP/USD and update the area of 1.2581, also formed at the end of the European session. A breakout and consolidation above this range will lead to the triggering of stop orders and a sharper rise in the pound to around 1.2609. The ultimate target will be the area of 1.2646, where I will make a profit. Testing this level will indicate the formation of a new upward trend for the pair. In the scenario of a pair decline and the absence of bullish activity at 1.2543 in the second half of the day, which seems likely after a sharp rise in inflationary pressure, bears may completely take control of the market. In such a case, only a false breakout in the area of the next support at 1.2506, the lower boundary of the sideways channel, will provide a signal to open long positions. I plan to buy GBP/USD immediately on a rebound only from 1.2478, with the target of a correction of 30-35 points within the day.

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

Sellers have proven their presence, and everything now depends on the data and the market reaction to them. Weak figures on inflation and its further decline in the US in November this year are a good reason to increase long positions in the pound. For this reason, I expect bearish activity only in the area of 1.2581. Only the formation of a false breakout there will allow for a sell signal and a chance for another downward movement to support at 1.2543. A breakout and reverse test from the bottom to the top of this range against the backdrop of strong statistics from the US will deal a more serious blow to bullish positions, leading to the triggering of stop orders and opening the way to the lower boundary of the channel at 1.2506. The more distant target will be the area of 1.2478, where I will take a profit. In the scenario of an increase in GBP/USD and the absence of activity at 1.2581 in the second half of the day, as everything is heading towards, I will postpone sales until a false breakout at the level of 1.2609. In the absence of downward movement even there, I will sell GBP/USD immediately on a rebound from 1.2646, but only counting on a pair correction down by 30-35 points within the day.

In the COT report (Commitment of Traders) for December 5, there was a sharp increase in long positions and a reduction in short ones. Demand for the pound persists, as recent statements by Bank of England Governor Andrew Bailey and other Bank of England officials that if the regulator does not continue to raise interest rates, it will at least maintain them at current highs, allowing buying the pair on every good downward movement. Meetings of the Federal Reserve and the Bank of England are ahead, and they will be decisive. The soft tone of American policymakers will weaken the dollar. If the situation is the opposite: the Fed announces that it needs to wait a little longer before lowering rates, and the Bank of England begins to worry about the prospects for economic growth, a decline in the pound is inevitable. The latest COT report states that long non-commercial positions increased by 5,063 to 66,359, while short non-commercial positions fell by 14,497 to 54,694. As a result, the spread between long and short positions increased by 3,025.

Indicator signals:

Moving averages

Trading is in the vicinity of the 30 and 50-day moving averages, indicating a sideways market.

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

Bollinger Bands

In the case of a decline, the lower boundary of the indicator around 1.2543 will act as support.

Indicator Descriptions:

• Moving Average (MA) - defines the current trend by smoothing volatility and noise. Period 50. Marked on the chart in yellow.
• Moving Average (MA) - defines the current trend by smoothing volatility and noise. Period 30. Marked on the chart in green.
• Moving Average Convergence Divergence (MACD) - Fast EMA period 12, Slow EMA period 26, SMA period 9.
• Bollinger Bands - consists of three lines: the middle line is the moving average, and the upper and lower lines are standard deviations of the price.
• Non-Commercial Traders - speculators, such as individual traders, hedge funds, and large institutions, using the futures market for speculative purposes and meeting specific requirements.
• Long Non-Commercial Positions - represent the total long open positions of non-commercial traders.
• Short Non-Commercial Positions - represent the total short open positions of non-commercial traders.
• Total Non-Commercial Net Position - is the difference between non-commercial long and short positions.