GBP/USD: trading plan for the US session on July 21st (analysis of morning deals). The pound performed well

During the morning forecast, I highlighted the significance of the 1.2904 level and recommended basing entry decisions on it. Let's analyze the 5-minute chart and what unfolded. The price surge occurred following the release of UK data, leading to a false breakout and an excellent selling signal. As a result, the pair experienced a decline of over 40 pips. Defending the support at 1.2852 provided an opportunity to enter long positions, resulting in a profit of about 20 points. If trading remains above 1.2852, we can anticipate a potential recovery within the channel. The technical outlook has been slightly revised for the second half of the day.

For opening long positions on GBP/USD:

Strong retail sales in the UK briefly supported pound buyers, but the pair faced renewed pressure after an unsuccessful attempt to break the 1.2904 level. The primary task for the bulls now is to defend the new support at 1.2843, established during the first half of the day. With no major US fundamental data expected today, there is a reasonable chance for the bulls to maintain the market above this range. In case of another decline in the pair, I will consider entering long positions only on a drop and a false breakout around 1.2843. The target in this scenario will be the new resistance at 1.2900, formed during the European session. A break above this range with sustained levels would provide an additional buying signal, aiming for 1.2960. The ultimate target would be around 1.3032, where I would take profits. If GBP/USD declines during the American session and buyers fail to defend 1.2843, which is quite likely, pressure on the pound will persist. In this case, defending the next area at 1.2798 and a false breakout there will signal an entry into long positions. I plan to buy GBP/USD on a rebound only from 1.2754 with a 30-35 point correction target within the day.

For opening short positions on GBP/USD:

Sellers have performed exceptionally well, aiming to break weekly lows, which could be challenging without fundamental statistics. If there is another upward surge in the pair during the second half of the day, I will postpone selling until a test of the new resistance at 1.2900, where the moving averages favor the bulls. Similar to the previously discussed scenario, a false breakout there would be an ideal selling signal to continue the bearish trend, possibly leading to a new trend with a target of 1.2843. Breaking and retesting this range from below would seriously blow buyer positions, pushing GBP/USD towards 1.2798. The ultimate target remains at the minimum of 1.2754, where I would take profits. If GBP/USD rises and there is limited activity around 1.2900 during the second half of the day, buyers may consider compensating for some recent losses at the week's end. In such a scenario, I would postpone selling until a test of the resistance at 1.2960. A false breakout there would provide an entry point for short positions. If there is no downward movement at that level, I will sell GBP/USD immediately on a rebound from 1.3032, with a target of a 30-35 pip correction within the day.

In the COT report (Commitment of Traders) for July 11th, there was an increase in both long and short positions. However, buyers outnumbered sellers by two to one, confirming the bullish market observed throughout this month. Pound buyers certainly have a good chance to act more aggressively. On the one hand, the Federal Reserve is satisfied with the rapid decline in inflation, reducing the probability of further rate hikes. On the other hand, the Bank of England, despite economic problems, will continue a high-interest rate policy due to serious inflation issues impacting household living standards. These policy differences will strengthen the pound and weaken the US dollar. The optimal strategy remains to buy the pound on declines. The latest COT report shows that non-commercial long positions increased by 15,206 to 111,667, against 96,461, while non-commercial short positions only rose by 7,408 to 53,604, against 46,196. This resulted in another increase in the non-commercial net position to 58,063, against 50,265 a week earlier. The weekly price increased and reached 1.2932, against 1.2698.

Indicator signals:

Moving Averages

Trading occurs below the 30-day and 50-day moving averages, indicating further decline in the pair.

Note: The author considers the period and prices of the moving averages on the hourly chart (H1), which 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 1.2843, will act as support.

Description of Indicators:

• Moving average (determines the current trend by smoothing volatility and noise). Period 50. Marked in yellow on the chart.

• Moving average (determines the current trend by smoothing volatility and noise). Period 30. Marked in green on the chart.

• MACD indicator (Moving Average Convergence/Divergence - measures the distance between two moving averages). Fast EMA with a period of 12. Slow EMA with a period of 26. SMA with a period of 9.

• Bollinger Bands (represent a range of price volatility). Period 20.

• Non-commercial traders - speculators such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting specific requirements.

• Non-commercial long positions represent the total long open positions of non-commercial traders.

• Non-commercial short positions represent the total short open positions of non-commercial traders.

• The non-commercial net position is the difference between non-commercial traders' short and long positions.