FX.co ★ GBP/USD: plan for the US session on May 27 (analysis of morning trades)

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

In the first half of the day, the volatility of the British pound was extremely low and amounted to only some 25 points. We did not reach the levels I indicated, and no signals were formed to enter the market. The current technical picture remains for the second half of the day, as buyers are still hoping for a breakdown of local highs.

The primary task of GBP/USD buyers for today is to control the support of 1.4154, which was formed yesterday in the afternoon. There are also moving averages that play on the side of buyers of the pound. Important reports on the US economy may lead to an update of the indicated level. The formation of a false breakout forms a signal to open long positions to continue the bull market that we observed yesterday. In this scenario, we can again expect the pair to recover to the resistance area of 1.4216. Its breakout and a top-down test on the volume will open a direct road for GBP/USD to the highs of 1.4264 and 1.4310, where I recommend taking the profits. If the pressure on the pound returns and the bulls do not show activity in the support area of 1.4154, I recommend not to rush to buy. The optimal scenario will be long positions immediately on the rebound from the low of 1.4102, or even lower - from the level of 1.4056 in the expectation of an upward correction of 25-30 points within the day.

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

In the first half of the day, we did not see the pound's growth, and the bears are slowly but surely getting closer to the support of 1.4154. A breakout and a test of this area from the bottom up, together with good fundamental indicators for the US economy, will form an additional entry point into short positions, which will collapse GBP/USD to the minimum of 1.4102, where I recommend taking the profits. In the scenario of the pound's growth in the second half of the day, the bears' task will be to protect the resistance of 1.4216. The formation of a false breakout forms a signal to open short positions. If there is no activity on the part of sellers, it is best to take your time: I advise you to postpone short positions until the update of the maximum of 1.4264, from which you can sell GBP/USD immediately on the rebound in the expectation of a downward correction of 20-25 points within the day.

In the COT reports (Commitment of Traders) for May 18, a reduction in long positions and a slight increase in short positions were recorded. The insufficiently strong inflation in the UK allows the Bank of England committee members to adhere to an ultra-soft monetary policy, on which the further direction of the British pound now depends. The fight against COVID is over. No one remembers it in England, especially since the economy has been fully opening since the beginning of the summer, which is an excellent bullish boost for retail sales and inflation. Against this background, the upward potential of the pound remains relatively high. You need to wait for a little. Do not be surprised if there are further large drawdowns in GBP/USD to find the bottom and large static buyers.

Given that the fundamental data recently does not significantly affect the pair's direction, I recommend paying more attention to the statements of representatives of the Bank of England and its Governor, Andrew Bailey. The COT report shows that long non-commercial positions declined from 64,947 to 63,027. However, this is more like profit-taking than abandoning long positions due to a change in market direction. At the same time, short non-profit positions rose from 36,771 to 38,127, bringing the non-profit net position down to 24,900 from 28,176 a week earlier. The closing price of last week did not change significantly and amounted to 1.41479 against 1.41308.

Signals of indicators:

Moving averages

Trading is conducted in 30 and 50 daily averages, which indicates the lateral nature of the market.

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 lower limit in the area of 1.4170 will increase the pressure on the pound. The growth will be limited by the upper level of the indicator in the area of 1.4215.

Description of indicators

• Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
• Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
• MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-profit speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet 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.