GBP/USD: Trading plan for US session on July 27. Overview of morning trades. Pound keeps hitting weekly highs

In the previous forecast, I drew your attention to the level of 1.2973 and recommended entering the market from it. Let's have a look at the 5-minute chart and analyze the situation. The pair pierced 1.2973, but it failed to retest this level from above. That's why I refrained from buying the pound. However, the pullback below 1.2973 around midday and the retest from below provided an excellent selling opportunity, leading to a 30-point decline. The technical picture for the second half of the day has been revised.

Long positions on GBP/USD:

The pair's further direction depends entirely on the US GDP data for the second quarter of this year. Reports on initial jobless claims and durable goods orders will have a lesser impact. If the GDP growth exceeds forecasts, it will put pressure on the pound, leading to a further correction from the weekly highs. A new support level forms at 1.2946 based on the first half of the day. A false breakout from there would offer an excellent entry point with the target for a rise to the resistance at 1.2990. A breakthrough and retest below this range after weak GDP data will signal a buy, strengthening the pound and allowing for a new high at 1.3032. Without reaching this level, bulls may find it challenging to continue the uptrend. If there's a breakthrough above this level, we can talk about a rally to 1.3085, where traders may take profits.

In the scenario where GBP/USD falls and there are no buyers at 1.2946, and just below that level the moving averages are bullish, buyers will get a chance for a bigger correction. In this case, I will postpone long positions until the pair reaches 1.2900 after a false breakout. You can also open long positions on a rebound from 1.2857, allowing a correction of 30-35 pips.

Short positions on GBP/USD:

Bears acted near the new highs today, but they have not gained control of the market yet. The focus remains on the US GDP report. It is crucial to hold the pair above 1.2990, as losing this level could negate hopes for further correction. A false breakout at 1.2990 after the data release will signal a sell-off with the target at the support of 1.2946. A breakthrough and retest of this range will provide an entry point for selling, aiming for a dip to 1.2900, which can be considered a significant correction. The next target is located near 1.2857, where profits can be taken. If the pound/dollar pair rises and bears show weak activity at 1.2990 in the second half of the day, bears may lose control of the market. In that case, a false breakout around 1.3032 would indicate a short position entry with the expectation of a pound decline. If there is no activity there, it is better to sell the pound from 1.3085, allowing an intraday downward correction of 30-35 pips.

The COT report for July 18 logged a sharp increase in both long and short positions. Traders are returning to the market after fundamental statistics that indicate relatively stable British economic conditions, being under pressure from high interest rates. The sharp decline in US inflation has boosted the pound, but its overbought condition and the central bank's strict policies raise concerns about future labor and housing market problems in the UK, which bears are taking advantage of, building up short positions whenever possible, as seen in the COT report. Recent PMI reports also point to growing issues. The Federal Reserve's meeting this week may cause the pound to rise again if the regulator ends its interest rate hike cycle. The optimal strategy is to buy the pound on dips. The latest COT report indicates that long non-commercial positions increased by 23,602 to 135,269, while short non-commercial positions rose by 17,936 to 71,540. This led to another rise in the non-commercial net position to 63,729 against 58,063 a week earlier. The weekly price increased to 1.3049 from 1.2932.

Signals of indicators:

Moving Averages:

The pair is trading above the 30- and 50-day moving averages, indicating that bulls have returned to the market.

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

Bollinger Bands:

In case of a decline, the lower boundary of the indicator near 1.2900 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). Fast EMA 12. Slow EMA 26. SMA 9.Bollinger Bands. Period 20.Non-commercial traders are 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 position of non-commercial traders.Short non-commercial positions represent the total short open position of non-commercial traders.Total non-commercial net position is the difference between the short and long positions of non-commercial traders.