GBP/USD: trading plan for the US session on January 10th (analysis of morning deals). The pound continues to show volatility

In my morning forecast, I emphasized the level of 1.2714 and planned to make market entry decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The breakout of 1.2714 occurred, but we never saw a retest, so I couldn't enter the market. The technical picture was revised for the second half of the day.

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

The pound has already responded with growth to the upcoming speech by the Governor of the Bank of England, Andrew Bailey. However, everything can change quickly if the Governor's speech takes a dovish tone. Considering that in the second half of the day, nothing else is scheduled apart from data on changes in wholesale inventory levels in the US and a speech by FOMC member John Williams, it's best to focus on Bailey and his statements. I prefer to take a buying position only after a decline and the formation of a false breakout around the new support at 1.2711. This will provide a suitable entry point for long positions within the bullish market continuation, where we can target 1.2735, an intraday resistance formed after yesterday's trading. 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 interest. The ultimate target will be around 1.2798, where I plan to take profits. In the scenario of GBP/USD declining and the absence of bullish activity at 1.2711 in the second half of the day, the pair may remain stuck in a sideways channel. However, Bailey's statements could change this situation. In that case, I will postpone buying until the next support at 1.2686, the intraday low and the last hope for the bulls. I plan to buy GBP/USD on the rebound only from 1.2650, with a 30-35 point correction target within the day.

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

Sellers failed to continue yesterday's trend, but that's not surprising, especially before Bailey's speech, who, for now, is maintaining a hawkish stance on interest rates. In the second half of the day, sellers need to think about protecting the 1.2735 resistance in case of a rise in the pair. The formation of a false breakout there will provide a suitable entry point for short positions with a potential decline towards the support at 1.2711, formed during European trading. A breakout and bottom-up retest of this range can only occur if Bailey's comments are very dovish, which would deal a more serious blow to bullish positions, opening the path to 1.2686. The ultimate target will be around 1.2650, where I plan to take profits. Buyers will regain the initiative in the scenario of GBP/USD rising and the absence of downward movement at 1.2735. In that case, I will postpone selling until a false breakout occurs at 1.2767. If there is no downward movement, I will sell GBP/USD on the rebound immediately from 1.2798, but only counting on a pair correction of 30-35 points within the day.

In the COT report (Commitment of Traders) for January 2, there was an increase in both long and short positions. There is continued demand for the pound, as the recent decision of the Bank of England to keep rates unchanged in anticipation of continued efforts to combat high inflation, as well as the statements by Governor Andrew Bailey that rates will remain high for a prolonged period, all go against the expected policy of the US Federal Reserve, which is planning rate cuts, noting substantial progress in controlling inflation. This is leading to the weakening of the US dollar against the British pound in the medium term. If new data on price growth in the US, expected soon, pleases central bank officials, we can expect another GBP/USD increase. The latest COT report mentioned that non-commercial long positions increased by 3,044 to 61,794, while short non-commercial positions increased only by 1,931 to 46,589. As a result, the spread between long and short positions increased by 38.

Indicator Signals:

Moving Averages:

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

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

Bollinger Bands:

In the event of a decline, the lower boundary of the indicator at 1.2725 will act as support.

Indicator Descriptions:

• 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 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 position of non-commercial traders.

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