FX.co ★ GBP/USD: plan for the European session on January 17. COT reports. Bears aim to cross 1.3653

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

Last Friday, several signals were formed to enter the market. Let's take a look at the 5-minute chart and figure out what happened. In my morning forecast, I paid attention to the 1.3706 level and advised you to make decisions on entering the market from it. A false breakout at this level in the first half of the day led to a good signal to buy the pound. However, the pair's growth was not as strong as it could have been, especially after good data on GDP growth and industrial production in the UK. A breakthrough and consolidation with a reverse test of 1.3706 in the afternoon resulted in forming a sell signal for GBP/USD. As a result, the pair went down more than 40 points.

The upward trend has slowed down, but the downward correction that we observed last Friday is only its continuation. The bulls' main goal for today, given that there are no fundamental statistics, is to regain control of the resistance of 1.3696, where the moving averages are playing on the bears' side. It is also important to protect the 1.3653 support, which was formed following last Friday's results. Forming a false breakout at 1.3653 creates a buy signal with the prospect of a resumption of the bull market aimed at growth above 1.3696. Only a breakthrough and a test of this level from top to bottom will give an additional entry point, which will strengthen the bulls' position in order to return to the monthly high of 1.3739. The 1.3790 level is a more distant target, which is where I recommend taking profits. In case GBP/USD falls during the European session and lack of activity at 1.3653, it is best to postpone long positions to the level of 1.3612, from where it will be possible to observe more aggressive actions from the bulls – this is their last chance to keep the market under their control in the short term. To miss this area is tantamount to missing the initiative. Forming a false breakout at 1.3612 will give an entry point in hopes of further recovery of GBP/USD. You can buy the pound immediately on a rebound from 1.3566, or even lower - from a low like 1.3532, counting on a correction of 20-25 points within the day.

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

Bears have declared themselves, but it is unlikely that these were aggressive actions, rather just bulls taking profits from highs. The bears' primary task for today is to protect the rather important resistance of 1.3696, just above which the moving averages are playing on the bears' side. Forming a false breakout at this level creates the first entry point into short positions against an upward trend, followed by a decline to the area of 1.3653, which was the result of a correction at the end of last week. Taking control of this level will provide a new entry point into short positions with the prospect of a decline in GBP/USD by 1.3612 and 1.3566, where I recommend taking profits. If the pair grows during the European session and the bears are weak at 1.3696, it is best to postpone short positions until the next major resistance at 1.3739. I also advise you to open short positions there only in case of a false breakout. You can sell GBP/USD immediately for a rebound from 1.3790, or even higher - from a new high in the area of 1.3842, counting on the pair's rebound down by 20-25 points within the day.

I recommend for review:

The Commitment of Traders (COT) report for January 4 revealed a sharp increase in long positions and a reduction in short positions - which indicates an increase in the pound's appeal after the Bank of England raised interest rates at the end of last year. If you look at the overall picture, the prospects for the British pound look pretty good. The BoE's decisions continue to support buyers of risky assets in the expectation that the central bank will continue to raise interest rates this year, which will make the pound even more attractive. High inflation remains the main reason why the BoE will continue to tighten monetary policy. On the other hand, the US dollar also has support: inflation data in the US are expected this week, which, together with the recent report on the US labor market, will certainly force the Federal Reserve to act more aggressively. The first interest rate hikes are planned in the spring, which will make the US dollar more attractive. The COT report for January 4 indicated that long non-commercial positions rose 20,824 to the level of 25,980, while short non-commercial positions fell from the level of 78,510 to the level of 65,151. This led to a serious change in the negative non-commercial net position from -57,686 to -39,171. The weekly closing price rose from 1.3209 to 1.3482.

Indicator signals:

Trading is conducted below the 30 and 50 moving averages, which indicates a possible downward correction of the pair.

Moving averages

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

Crossing the lower limit of the indicator in the area of 1.3650 will lead to a larger sale of the pair. In case of growth, the upper limit of the indicator around 1.3720 will act as resistance.

Description of indicators

• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
• MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that 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.
• Total non-commercial net position is the difference between short and long positions of non-commercial traders.