GBP/USD: trading plan for the US session on January 8th (analysis of morning deals)

In my morning forecast, I drew attention to the level of 1.2680 and planned to make trading decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The decline and the formation of a false breakout around 1.2680 led to an excellent entry point for buying the pound, which, at the time of writing this article, resulted in an upward movement of more than 30 points. The technical picture was slightly revised in the second half of the day.

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

Considering the absence of significant economic data from the UK, the pound was quickly bought up after an unsuccessful attempt by bears to return to the market in the first half of the day. In the second half of the day, we expect speeches from Federal Reserve representatives, and the direction of the pair depends on their tone, which is likely to be dovish. However, I prefer to act on buying similarly to how I acted during the European session. The formation of a false breakout around the new support level of 1.2674 will provide a suitable entry point for long positions, where you can aim for 1.2727 – a significant intraday resistance formed by the end of the first half of the day. A breakout and consolidation above this level will strengthen demand for the pound and open the way to 1.2767, where I expect more active selling. The ultimate target will be the area around 1.2798, where I plan to make a profit. Things will go poorly for buyers in the scenario of GBP/USD decline and the absence of bullish activity at 1.2674 in the second half of the day. In this case, I will postpone purchases until the next support level of 1.2642, the last hope for bulls. I plan to buy GBP/USD immediately on the rebound only from 1.2612 with the goal of a 30-35 point intraday correction.

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

Sellers tried, and the downward movement seemed decent, but the bulls quickly reversed it. Now, in the second half of the day, it's time to think about how to protect the daily maximum, the movement towards which may occur in case of dovish rhetoric from Federal Reserve representatives. Therefore, only the formation of a false breakout around 1.2727 will provide a suitable entry point for short positions with the prospect of a decline toward the support at 1.2674. A breakout and a reverse test from below to above this range is only possible in the case of very hawkish comments, which will deal a more serious blow to bullish positions, opening the path to 1.2642. The ultimate target will be the area around 1.2612, where I plan to make a profit. Buyers will strengthen their advantage early next week in the scenario of GBP/USD rising and the absence of downward movement at 1.2727. In this case, I will postpone selling until the false breakout at 1.2767. Without a downward movement there, I will sell GBP/USD immediately on the rebound only from 1.2798, but with the expectation of a 30-35 point intraday correction.

In the COT report (Commitment of Traders) as of December 12, there was a sharp increase in long positions and a decrease in short positions. Demand for the pound remains strong, as the recent decision of the Bank of England to keep rates unchanged in anticipation of further fighting high inflation, along with statements by Bank of England Governor Andrew Bailey that rates will remain high for an extended period, have revived the pound and led to its strengthening against the US dollar. However, the key question is how the UK economy, facing significant challenges recently, will react to this. In the near future, a batch of data on inflation in the UK and the US will be released, and in case of rising prices, we can expect the pair to strengthen further. In the latest COT report, it is stated that long non-commercial positions increased by 5,652 to the level of 72,011, while short non-commercial positions decreased by 4,264 to the level of 50,430. As a result, the spread between long and short positions decreased by 3,373.

Indicator signals:

Moving Averages

Trading is conducted around the 30 and 50-day moving averages, indicating a sideways market.

Note: The author considers the period and prices of moving averages on the H1 hourly chart and differs from the general definition of classical daily moving averages on the D1 daily chart.

Bollinger Bands

In case of a decline, the lower boundary of the indicator at 1.2685 will act as support.

Indicator Descriptions:

Moving Average (MA) determines the current trend by smoothing volatility and noise. Period - 50. Highlighted in yellow on the chart.Moving Average (MA) determines the current trend by smoothing volatility and noise. Period - 30. Highlighted in green on the chart.MACD (Moving Average Convergence/Divergence) indicator. Fast EMA - period 12. Slow EMA - period 26. SMA - period 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 positions 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.