FX.co ★ GBP/USD: plan for European session on April 5th. Commitment of Traders (COT) report (analysis of yesterday's trades). Pound continues steady growth

There were several entry signals yesterday. Let us take a look at the 5-minute chart and analyze what happened. In my morning forecast, I drew attention to the 1.2443 level and recommended making market entry decisions with this level in mind. Growth and a false breakout of this level created a sell signal, which unfortunately resulted in losses. It was not possible to enter long positions after the breakout of 1.2443, as there was no retest of this level. In the second half of the day, only a false breakout of the rather significant resistance of 1.2505 provided a sell entry point for the pound sterling, which ended in a downward movement of more than 40 pips.

When to open long positions on GBP/USD:

Today, interesting UK services PMI and composite index data are expected in the first half of the day, which may trigger further pound purchases aimed at breaking the monthly high and continuing the upward trend. Bank of England MPC member Silvana Tenreyro's speech may also benefit bulls. If there is a negative reaction to the data, it would be good to wait for a correction to the area of 1.2455. I plan to go long on the pound at that level only if there is a false breakout. Only in this case can we expect a renewed upward surge to the monthly high of 1.2519, which was not breached yesterday. Consolidation and a downward test of this range based on strong data will provide an entry point, pushing the pair towards 1.2551. Breaking above this range will open the way to 1.2592, where I will take profits. If bulls fail to meet their objectives and lose 1.2455 or do not show significant activity in the first half of the day, we can expect a larger correction. In this case, I will open long positions only on a false breakout around the next support level of 1.2396. I plan to buy GBP/USD immediately on a rebound from the low of 1.2335, targeting an intraday correction of 30-35 pips.

When to open short positions on GBP/USD:

Sellers need to assert themselves around 1.2519, as they will not have another opportunity. If they miss this level, the bulls will have a chance to continue the trend. Only a false breakout at 1.2519 after the release of the UK services PMI data will lead to a sell signal, pushing GBP/USD down to the nearest support at 1.2455, where the moving averages favor the bulls. A breakthrough and an upward retest of this range will intensify pressure on the pound, creating a sell signal mid-week and bringing GBP/USD down to 1.2396. This would be a significant enough correction to disrupt the upward trend. The low of 1.2335 remains the main target. If the pair tests it, it would nullify all plans of bullish traders for further upside movement of GBP/USD. If GBP/USD rises and there is no activity at 1.2519, which is also quite likely, it is best to postpone opening new long positions until the pair tests the new high of 1.2551. Only a false breakout of this level will provide an entry point for short positions. If there is no downside movement there, I will sell GBP/USD on a rebound immediately from the high of 1.2592, but only targeting an intraday correction of 30-35 pips.

Commitment of Traders (COT report):

The Commitment of Traders (COT report) for March 28 noted that long positions decreased while short positions declined. In reality, there were no significant changes in the balance of power. The upwardly revised Q4 UK GDP data was enough to keep the pound sterling near monthly highs and return GBP to them at the beginning of this month. Statements made by BoE Governor Andrew Bailey led to anticipation of further interest rate hikes, which favored bullish traders. The latest COT report states that non-commercial short positions increased by 3,289 to 52,439, while non-commercial long positions decreased by 297 to 28,355, increasing the negative non-commercial net position to -24,084 compared to -20,498 a week earlier. The weekly closing price rose to 1.2358 from 1.2241.

Indicators' signals:

Moving averages

Trading is carried out above 30 and 50-day moving averages, which indicates that the pair is likely to rise in the future.

Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

If GBP/USD decreases, the lower boundary of the indicator at 1.2175 will serve as resistance.

Description of indicators

Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart. Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked 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 the short and long positions of non-commercial traders.