FX.co ★ GBP/USD trading plan for European session on August 22, 2023. COT report and overview of yesterday's trades. The pound keeps its balance

Yesterday, the pair formed several good signals to enter the market. Let's analyze what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2726 as a possible entry point. A decline and false breakout at this mark generated a good buy signal. As a result, the pair rose by 15 pips. During the US session, a false breakout and retracement below 1.2753 gave a sell signal. As a result, the pair fell by 25 pips.

COT report:

The Commitments of Traders (COT) report for August 15 recorded an increase in both long and short positions. Traders built up positions after the UK GDP report, which was better than economists' expectations. US inflation cooling also had an impact on the balance of power, supporting the pound, as well as persistent core pressure in the UK. Federal Reserve officials will hold their annual Jackson Hole symposium later this week, which could lead to even more strengthening of the British Pound in the short term. The focus will be on Fed Chair Jerome Powell's speech about US monetary policy. As before, the optimal strategy is to buy the pound on dips, as the difference in the policies of the central banks will affect the prospects of the US dollar, putting pressure on it. The latest COT report indicates that long positions of the non-commercial group of traders rose by 7,302 to 90,541, while short positions jumped by 3,334 to 39,553. As a result, the spread between long and short positions narrowed by 607. The weekly closing price dropped to 1.2708 compared to the prior value of 1.2749.

For long positions on GBP/USD:

Today, the UK will publish reports on public sector net borrowing and the CBI's industrial trends orders. In the event of weak reports, it would be best to act on a decline and false breakout near the new support level at 1.2751. Just below this level are the bullish moving averages, which will form a good entry point for long positions leading to an upward move targeting the resistance at 1.2783. The pair has not been able to get out of this since August 17. A breakout and a downward retest of this range will form an additional buy signal and will reinforce the pound sterling, allowing it to reach a new high of 1.2812. If the pair goes above this range, it might break towards 1.2847, where I will take profits. If GBP/USD declines and there is no buying activity at 1.2751, especially if the UK publishes weak data, the pair will continue to trade within a sideways channel with the bulls having the upper hand. In this case, only the defense of the 1.2723 area and its false breakout would give a signal for opening long positions. I will open long positions immediately on a rebound from 1.2689, keeping in mind a daily correction of 30-35 pips.

For short positions on GBP/USD:

Bearish traders did their best yesterday, but buyers are clearly interested in a lower value of the pound. In the first half of the day, it is important to keep the pair below 1.2783. A breakout of this level will produce a sell signal with a prospect of falling to the support at 1.2751, formed yesterday and where a real battle will unfold. A breakout of this level and its upward retest will create an entry point for short positions with a target of 1.2723. The ultimate target is the low at 1.2689 where I will be locking in profits. If GBP/USD trends upward during the European session and if no selling activity is observed at 1.2783, amid strong UK reports, the bulls will maintain control of the market, and will start an upward correction. In such a scenario, a false breakout near the next resistance at 1.2812 would provide an entry point for going short. If there is no downward movement there, I would sell the pound right on a rebound from 1.2847, keeping in mind an intraday correction of 30-35 pips.

Indicator signals:

Moving Averages

Trading is taking place above the 30-day and 50-day moving averages, which suggests that GBP/USD will recover.

Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.

Bollinger Bands

If GBP/USD grows, the indicator's upper border near 1.2780 will serve as resistance. If GBP/USD falls, the indicator's lower border near 1.2735 will serve as support.

Description of indicators:

• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;

• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;

• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;

• Bollinger Bands: 20-day period;

• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements;

• Long non-commercial positions represent the total number of long positions opened by non-commercial traders;

• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;

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