FX.co ★ GBP/USD: trading plan for the US session on February 2nd (analysis of morning deals). The pound can't decide on direction

In my morning forecast, I drew attention to the level of 1.2771 and planned to decide on market entry based on it. Let's look at the 5-minute chart and analyze what happened there. The rise and the formation of a false breakout at 1.2771 led to a sell signal, but as you can see on the chart, a significant sell-off has yet to occur, and it is unlikely to happen before the release of US data. The technical picture has been reassessed for the second half of the day.

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

Considering that I expect a fairly strong surge in volatility after the publication of US data, the technical picture has been reassessed. In particular, the nearest support levels changed. The unemployment rate and changes in the number of employed in the non-agricultural sector will be decisive for the pair's direction. Weak reports with an increase in unemployment and a sharp reduction in the number of employed will lead to a new strengthening of GBP/USD. If the data turns out to be stronger than the forecasts, the dollar will undoubtedly regain some of the positions lost yesterday.

I plan to buy on the decline only after the formation of a false breakout around 1.2729, which will provide an excellent entry point for long positions, counting on a repeat pair recovery towards the resistance level of 1.2769. A breakthrough and consolidation above this range after weak US statistics will strengthen demand for the pound and open the way to 1.2797. The ultimate target will be a maximum of 1.2823, from which I plan to profit. In the scenario of a pair decline and the absence of bullish activity at 1.2729 in the second half of the day, which will be possible only in the case of very strong labor market statistics, I will postpone purchases until the test of 1.2704, where the moving averages intersect, playing on the side of bulls. Only a false breakout will confirm the correct entry point into the market. I plan to buy GBP/USD immediately on the rebound from the minimum of 1.2679, with a correction target of 30-35 points within the day.

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

Sellers have made themselves known but less actively than desired. While trading is below 1.2769, a decline in the pound can be expected, but I doubt it will be significant. Only the formation of a false breakout at 1.2769 after the release of labor market statistics will allow us to be sure of the presence of major players betting on a pair decline, which will allow opening short positions with the goal of a decrease to around 1.2729 – support that we have not reached today. A breakthrough and a reverse test from the bottom to the top of this range are crucial, as this will strike the positions of bulls, leading to the removal of stop orders and opening the way to 1.2704. The ultimate target will be the area of 1.2679, where profit will be fixed. In the scenario of GBP/USD growth and the absence of activity at 1.2769 in the second half of the day, buyers will again take the initiative, continuing to build a new upward trend. In this case, I will postpone sales until a false breakout at 1.2797. If there is no downward movement, I will sell GBP/USD immediately on the rebound from 1.2823, but I am only counting on a pair correction down by 30-35 points within the day.

In the COT report (Commitment of Traders) for January 23rd, there was an increase in both short and long positions. Considering that traders are confused, as is probably the Bank of England itself, the pound continues receiving support from risk asset buyers. The regulator is unlikely to go for a rapid rate cut – especially after recent news of a resumption of inflationary pressure growth. Two meetings will take place soon to determine the further direction of the pound. These are the meetings of the Federal Reserve and the Bank of England. The tough stance of regulators may negatively affect the demand for risk assets, including the British pound, but I would not expect a sharp drop in GBP/USD. The latest COT report states that long non-commercial positions increased by 6,369 to 72,599, while short non-commercial positions jumped by 5,863 to 41,162. As a result, the spread between long and short positions increased by 1,014.

Indicator Signals:

Moving Averages

Trading is conducted above the 30 and 50-day moving averages, indicating further pair growth.

Note: The author considers the period and prices of moving averages on the hourly chart H1 and differs 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, around 1.2729, will act as support.

Indicator Descriptions:

• 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, use the futures market for speculative purposes and 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 positions of non-commercial traders.
• The total non-commercial net position is the difference between non-commercial traders' short and long positions.