FX.co ★ GBP/USD: trading plan for European session on April 17. Commitment of Traders. GBP takes nosedive

Last Friday, there were several good entry points. Now, let's look at the 5-minute chart and figure out what actually happened. In my morning article, I turned your attention to 1.2517 and recommended making decisions with this level in focus. A breakout and the retest of this level led to a sell signal. However, a significant downward movement did not occur. After a drop of 15 pips, pressure on the pair subsided. Closer to the afternoon, a false breakout of 1.2488 gave a buy signal. The pound sterling climbed by more than 35 pips. However, the pair faced strong bearish pressure again after the release of US data. A breakout and an upward retest of 1.2488 provided new entry points into short positions. The pair declined by more than 50 pips.

When to open long positions on GBP/USD:

Market reaction to US retail sales data was rather odd. The US dollar grew rapidly even despite a sharp decline in retail sales. However, if we study the report more carefully, we will find out that excluding energy prices, retail sales did not fall as much as expected. Today, the bears may continue to exert pressure on the pound sterling as the economic calendar for the UK remains empty. It means there are no drivers for further growth. The pound sterling may recover following the speeches of Deputy Governor for Financial Stability Jon Cunliffe. Yet, I personally doubt it. For this reason, I would advise you to postpone long positions. Only a decline and protection of the support level of 1.2386 with a false breakout will create new entry points into long positions with the prospect of a rise to 1.2426. It is quite important for the bulls to take control of this level. A breakout and consolidation above this level will give a new buy signal with a jump to 1.2467 where the moving averages are passing in negative territory. A more distant target is located at the 1.2519 level. However, the pair is unlikely to reach this level at the start of the week. At this level, I recommend locking in profits. If the pair falls to 1.2386 and bulls show no activity, it is better not to open long positions until a false breakout of the support level of 1.2344. You could buy GBP/USD at a bounce from 1.2310, keeping in mind an upward correction of 30-35 pips.

When to open short positions on GBP/USD:

Sellers need to defend 1.2426. If they fail, bulls will return to the market. They are sure to try to push the pair to the levels logged on Friday. The empty economic calendar may help them significantly. A false breakout of 1.2426 could trigger a correction to 1.2386. A breakout and an upward test of this level amid the dovish rhetoric of BoE policymakers will increase pressure on the pound sterling, giving a sell signal with a drop to 1.2344. A more distant target is located at the 1.2310 level where I will lock in profits. If GBP/USD rises and bears show no activity at 1.2426, which is also quite likely, it is better to postpone short positions until the test and a false breakout of the resistance level of 1.2467. If there is no downward movement there, you could sell GBP/USD at a bounce from a high of 1.2519, keeping in mind a downward intraday correction of 30-35 pips.

COT report

The COT report for April 4 logged an increase in both long and short positions. However, it did not significantly affect the downward correction of the pair. Judging by the charts, it is gradually coming to an end. This week, the UK will unveil its GDP data which may facilitate the bullish sentiment. Hence, the pair could return to monthly highs. There will be no speeches from BoE policymakers. Therefore, traders will focus on US inflation and retail sales data. The US dollar may regain the upper hand following the release of these reports. The latest COT report showed that short non-profit positions increased by 8,769 to 61,109, while long non-profit positions jumped by 18,060 to 46,415. It led to a sharp decline in the negative delta of the non-profit net position to -14,793 against -24,084 a week earlier. The weekly closing price rose to 1.2519 against 1.2241.

Indicators' signals:

Trading is carried out below the 30 and 50 daily moving averages, which indicates a downward correction.

Moving averages

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 declines, the indicator's lower border at 1.2360 will serve as support.

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.