FX.co ★ GBP/USD: trading plan for the US session on February 14th (analysis of morning deals). The pound collapsed after the inflation data

In my morning forecast, I highlighted the level of 1.2573 and planned to make decisions on market entry based on it. Let's look at the 5-minute chart and analyze what happened. The breakthrough and reverse test of 1.2573 from bottom to top resulted in a sell signal, leading to a drop in the pair by more than 30 points. The technical picture was reassessed in the second half of the day.

To open long positions on GBP/USD, the following is required:

The released inflation data in the UK turned out to be below economists' forecasts, weakening demand for the pound and leading to another round of selling, formed as a result of yesterday's fundamental statistics on the US. Sellers are targeting a retest of the annual minimum, so I'm unlikely to make any buying decisions until it is tested. We have no macroeconomic indicators ahead, so all attention will be focused on the speech of FOMC member Austan D. Goolsbee. His speech is unlikely to significantly impact market sentiment, but another strong comment on high inflation could push the pound into another round of selling.

I plan to act against the new trend only after a decline and the formation of a false breakout in the area of 1.2519 – the annual minimum. This will provide an excellent entry point for long positions, expecting a correction and the pair's recovery to 1.2561 – the new resistance formed at the end of the first half of the day. A breakthrough and consolidation above this range against the backdrop of soft Fed representatives' comments will strengthen demand for the pound, opening the way to 1.2608, where moving averages are located. The ultimate target will be a maximum of 1.2652, where I plan to make a profit. In the scenario of the pair's decline and the absence of activity from the bulls at 1.2519 in the second half of the day, which can only happen in case of strong signals from the FOMC, pressure on the pound will increase. In this case, I will postpone purchases until the test of 1.2486. Only a false breakout there will confirm the correct entry point. I plan to buy GBP/USD immediately on the rebound from the minimum of 1.2451 with a target of a 30-35 point correction within the day.

To open short positions on GBP/USD, the following is required:

Sellers control the market and are targeting the annual minimum. I prefer to open new short positions only on growth near the resistance of 1.2561, which is intermediate. Therefore, only the formation of a false breakout there will confirm the presence of major players, leading to a decline to 1.2519. A breakthrough and reverse test from the bottom to the top of this range will strike at bullish positions, leading to the removal of stop orders and opening the way to 1.2486, which will only strengthen the bearish trend. The ultimate goal will be the area of 1.2451, where profit will be fixed. In the scenario of GBP/USD growth and the absence of activity at 1.2561 in the second half of the day, buyers will try to build a small upward correction. In this case, I will postpone sales until a false breakout at the level of 1.2608. In the absence of downward movement and there, I will sell GBP/USD immediately on the rebound from 1.2652, but only expecting a pair correction down by 30-35 points within the day.

In the COT report (Commitment of Traders) for February 6, there was an increase in both short and long positions. Despite traders now having a clear view of the future policy of the Bank of England, which intends to continue actively combating inflation, the pound is not in a hurry to show growth. Recent statements by British politicians indicate a soft wait-and-see position, which can change at any moment – if, of course, the data allows. A lot of statistics on the labor market, wage growth, and inflation in the UK will be released soon, which can significantly change the balance of power in the market. But do not forget to add the waiting position of the Federal Reserve to all this, so there is more uncertainty now than before. The latest COT report states that long non-commercial positions increased by 6,437 to the level of 83,936, while short non-commercial positions jumped by 6,115 to the level of 49,461. As a result, the spread between long and short positions decreased by 2,374.

Indicator signals:

Moving Averages

Trading is below the 30 and 50-day moving averages, indicating further pair decline.

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

Bollinger Bands

In case of decline, the lower boundary of the indicator at 1.2560 will act as support.

Indicator Descriptions

• Moving average (determines the current trend by smoothing volatility and noise). Period 50. Marked on the chart in yellow.

• Moving average (determines the current trend by smoothing volatility and noise). Period 30. Marked on the chart in green.

• MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages). Fast EMA period 12. Slow EMA period 26. SMA period 9

• Bollinger Bands. Period 20

• Non-commercial traders - speculators, such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting 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.

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