FX.co ★ GBP/USD trading plan for European session on January 12, 2024. COT report and overview of yesterday's trades. The pound trades near the weekly high

Yesterday, the pair formed several entry signals. Let's see what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2739 as a possible entry point. A decline and false breakout at this level generated an excellent buy signal, which sent the pair up by more than 30 pips. In the afternoon, a false breakout at 1.2771 and strong US data sent the pair down by 60 pips. After the bulls' attempt to return to the market, a failed consolidation at 1.2739 led to another sell signal. As a result, the pair fell by another 40 pips.

For long positions on GBP/USD:

Strong US data was the main reason for selling the pound and buying the dollar in the latter half of Thursday. However, the bulls quickly seized the opportunity, rebounding from the decline. Today, all hopes are pinned on favorable changes in the UK's GDP and industrial production data. If the UK reports turn out to be weak, the pressure on the pair is likely to return, and the pair will continue to trade within the broad sideways channel that we've been in all week. In case the pound falls, buyers need to make their presence felt around the new support at 1.2753, which is in line with the bullish moving averages. A false breakout there will provide an excellent entry point for long positions in developing the bullish market. It will also help bring GBP/USD back to the area of the new resistance at 1.2789. A breakout and consolidation above this range will strengthen the demand for the pound and open the way to 1.2823. The farthest target will be the 1.2853 high, where I will take profits. If the pair falls and there is no buying activity at 1.2753 in the first half of the day after weak UK data, which is most likely the case, the bears will gain an advantage. In this case, I will postpone buying until the test of 1.2722. Only a false breakout there will signal opening long positions. I plan to buy GBP/USD immediately on a rebound from the low of 1.2690, aiming for an intraday correction of 30-35 pips.

For short positions on GBP/USD:

The sellers still have a lot of problems to deal with, but they are not going to let the pair go beyond the upper band of the sideways channel. Only a false breakout at 1.2789 after weak UK reports will ensure that there are big bears in the market, creating a sell signal with the expectation of the pair's decline to 1.2753, a support that was established yesterday. A breakout and an upward retest of this range will deal a more serious blow to the bulls' positions, leading to the removal of stop orders and open the way to 1.2722. The furthest target will be the area of 1.2690, where I will take profits. If GBP/USD rises and there is no activity at 1.2789, and so far everything is moving towards that, traders will continue to develop a bullish market. In this case, I would delay short positions until a false breakout at 1.2823. If there is no downward movement there, I will sell GBP/USD immediately on a bounce right from 1.2853, considering a downward correction of 30-35 pips.

COT report:

The Commitment of Traders (COT) report for January 2 showed an increase in both long and short positions. It is clear that the pound is in demand for certain reasons. The Bank of England's recent decision to leave interest rates unchanged as it continues its fight to curb inflation, as well as statements by BoE Governor Andrew Bailey that rates will remain high for an extended period - all of this goes against the expected policy of the Federal Reserve, where the central bank plans to lower interest rates, citing good progress in addressing inflation. This divergence is exerting pressure on the dollar, and weakens the GBP/USD pair in the medium term. If the latest US inflation data pleases central bank officials, we can expect another rise in GBP/USD. The latest COT report indicates that non-commercial long positions rose by 3,044 to 61,794, while non-commercial short positions were up by 1,931 to 46,589. As a result, the spread between long and short positions decreased by 38.

Indicator signals:

Moving Averages

The instrument is trading above the 30 and 50-day moving averages. It indicates that GBP/USD is likely to rise.

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 falls, the indicator's lower boundary near 1.2753 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.