GBP/USD: plan for the US session on May 24 (analysis of morning trades)

To open long positions on GBP/USD, you need to:

In the first half of the day, I recommended paying attention to the level of 1.4171 and opening short positions from it in the continuation of the downward trend. Let's look at the 5-minute chart and talk about what happened. In the first half of the day, we could see the bulls trying to get above the resistance of 1.4171, but nothing good came of it. The formation of a false breakout led to the formation of a signal to open short positions, which returned the market to the control of sellers. As a result, the drop was more than 60 points.

Given that the technical picture of the pair did not change in the first half of the day, the trading scenario for the US session remains relevant. I think that even after an unsuccessful attempt to get beyond 1.4171, the bulls are unlikely to give up quickly. Their initial task for the second half of the day is to break above the level of 1.4171. The breakout and its top-down test will lead to the formation of a signal to open new long positions in the continuation of the upward trend with the immediate goal of returning to the monthly maximum in the area of 1.4230, where I recommend taking the profits. If you look at the chart, you will see that just below 1.4171, there are moving averages that limit the upward potential of the pair. It is hardly possible to expect a breakthrough of the level of 1.4230 and this can happen only in the afternoon when parliamentary hearings on the Bank of England's monetary policy report will be held and the Governor of the Bank of England, Andrew Bailey, will make a speech. If the GBP/USD goes beyond 1.4230, the next major resistance will be seen in the area of 1.4310. In the scenario of a decline in the pound during the US session, which is more likely, since Andrew Bailey is likely to advocate maintaining an ultra-soft monetary policy, the bulls should show themselves in the area of 1.4105. The formation of a false breakout forms an excellent entry point into the continuation of the upward trend. If buyers do not show activity, the pressure on the pound may return, and the bears will continue to build a new downward channel. In this case, I do not recommend rushing to buy: the optimal scenario will be long positions for a rebound from a large low of 1.4041, based on an upward correction of 25-30 points within the day.

To open short positions on GBP/USD, you need to:

The bears have coped with the task for the first half of the day and are still fully in possession of the initiative. While trading will be conducted below the level of 1.4171, we can expect a decline in GBP/USD in the area of the lower border of the side channel 1.4105. The repeated formation of a false breakout in the area of 1.4171 and the statements of the Governor of the Bank of England Andrew Bailey on the topic of maintaining an ultra-soft monetary policy will significantly affect the direction of the British pound. Thus, I expect a larger decline in the pair to the area of 1.4105. A test of this area from the bottom up will form an additional entry point into short positions, which will collapse GBP/USD already in the area of the minimum of 1.4041, where I recommend taking the profits. In the scenario of the pound rising above 1.4171 in the second half of the day, I advise you to postpone short positions until the maximum is updated in the area of 1.4230, from which you can open short positions immediately for a rebound in the expectation of a downward correction of 20-25 points within the day.

Let me remind you that the COT reports (Commitment of Traders) for May 11 recorded an increase in both long and short positions. All this happened against the background of a small downward correction of the pair, which was completely recouped after good indicators on the rate of contraction of the UK economy in the 1st quarter of this year. The growth last month also gave investors hope that the British pound will continue to gain strength. As early as early summer, almost all quarantine restrictions will be lifted in the UK. Given the good rate of vaccination against coronavirus, we can assume a sharp recovery in GDP in the 2nd quarter of 2021, which will be the highest in the history of this indicator. Such news strengthens investors' confidence in the British pound and its prospects. The COT report shows that long non-profit positions have grown from the level of 52,262 to the level of 64,947. At the same time, short non-profit positions rose from 32,414 to 36,771, bringing the non-profit net position to 28,176 from 19,848 a week earlier. Last week's closing price also jumped significantly to 1.41308, against 1.39033.

Signals of indicators:

Moving averages

Trading is conducted around 30 and 50 daily averages, which indicates the sideways nature of the market before important fundamental events.

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

Bollinger Bands

A break of the upper limit of the indicator in the area of 1.4171 will lead to a new wave of growth of the pound. A break of the lower limit in the area of 1.4125 will increase the pressure on the pound.

Description of indicators