22.07.202108:44 Forex Analysis & Reviews: GBP/USD: plan for the European session on July 22. COT reports. Pound recovers from lows and is doing it quite actively

To open long positions on GBP/USD, you need:

The British pound managed to strengthen its positions against the US dollar and rose by almost 100 points, which indicates that big players who are betting on the recovery of the pound in the medium term have returned. Let's take a look at the 5 minute chart and see what happened. A decline and breakthrough of 1.3606 occurred at the very beginning of the European session, however, upon a reverse test of this level from the bottom up (when a signal to open short positions should have formed), a reverse breakout of this level occurred and the pair rose above 1.3606, canceling all of the bears' plans. There was no signal to buy the pound either, since whenever the price approached the level of 1.3606 from top to bottom, it broke out.

After the bulls surpassed 1.3639 in the afternoon, I did not see a reverse test of this level from top to bottom, therefore I missed the entire upward movement to 1.3674. Only a breakthrough and consolidation at this range created a good buy signal, after which the pair recovered by another 40 points. However, taking long positions after such a large rally against the bear market was quite dangerous, so I also gave up on buying.

Exchange Rates 22.07.2021 analysis

Ben Broadbent, Deputy Governor of the Bank of England for Monetary Policy, will speak in the morning and his statements may return the pressure on the British pound. Let me remind you that at the beginning of the week his colleague spoke in favor of further preservation of incentives, which put pressure on the pound. If Broadbent takes the same position, then GBP/USD would be under pressure in the morning. Yesterday, the bulls did everything to not only stop the downward trend, but also took a serious step to reverse it. Now the bulls are focused on the resistance at 1.3719, as only a breakthrough and consolidation at this level with a reverse test from top to bottom can push the pound to new highs of 1.3756 and 1.3791. The next target will be the resistance at 1.3823, where I recommend taking profits. In case the pair falls after the speech of the representative of the Bank of England, the bulls will focus their attention on the support at 1.3674, just below which are the moving averages playing on their side. Forming a false breakout there will be a signal to open new long positions in continuation of the upward trend. If the bulls are not active in the 1.3674 area, then it is best to postpone long positions until the 1.3636 low has been updated, but even there you can count on buying only if a false breakout is formed. If we do not see a rapid upward movement from 1.3636, I recommend buying GBP/USD immediately on a rebound only from a low like 1.3592, or even lower - in the 1.3562 area, counting on an upward correction of 25-30 points within the day.

To open short positions on GBP/USD, you need:

The bears' initial task is to protect the resistance at 1.3719. Forming a false breakout there, similar to entry points, generates a sell signal, which will return pressure to the pound and keep the market bearish. In this case, the closest target will be support at 1.3674, below which there is a large number of buy stop orders, as well as moving averages. The breakdown and reverse test of 1.3606 from the bottom up together with the statements of the representative of the Bank of England that the central bank has no intentions to curtail the programs to support the economy will lead to forming a new entry point for short positions. The demolition of the bulls' stop orders below 1.3674 will bring the pair down to a low like 1.3636, and then to support at 1.3592, where I recommend taking profits. The 1.3563 level is the next target. If the bears are not active in the 1.3719 area, I recommend postponing short positions until the test of a larger high at 1.3756, or sell GBP/USD immediately after a rebound from 1.3791, counting on a downward correction of 25-30 points within the day.

Exchange Rates 22.07.2021 analysis

The Commitment of Traders (COT) report for July 13 recorded a sharp decline in long positions and a slight increase in short ones. This suggests that US inflation has influenced the sentiment of the bulls in a negative direction. The fact that representatives of the Bank of England have recently been reluctant to talk about plans to cut the bond purchase program once again proves their cautious stance on this issue. The UK government completely canceled all quarantine restrictions on July 19 this year, but according to the latest figures on the incidence in the country of the new Delta coronavirus strain, this won't take long. Undoubtedly, after each major downward movement of GBP/USD, traders show particular interest, as sooner or later the central bank will talk about curtailing support measures for the economy, which will have a positive impact on the British pound and lead to its growth. But as long as it does not severely stray away from the UK inflation target, then the Bank of England is unlikely to rush to make changes to its policy. Despite this, the best scenario is to buy the pound for every good decline against the US dollar. The COT report indicated that long non-commercial positions declined from 57,232 to 44,686, while short non-commercial positions rose from 35,329 to 36,717. As a result, the non-commercial net position decreased to 7,969 from 21,903 The closing price of the last week increased slightly and amounted to 1.3886 against 1.3853.

Indicator signals:

Trading is carried out above 30 and 50 moving averages, which indicates an attempt by the bulls to form a new uptrend.

Moving averages

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

Bollinger Bands

Growth will be limited in the area of the upper level of the indicator 1.3756. In case the pair falls, support will be provided by the lower border of the indicator at 1.3625.

Description of indicators

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

*Účelem zde zveřejněné analýzy trhu je zvýšení vašeho povědomí, nikoli dávání pokynů k obchodování.

Miroslaw Bawulski,
Odborný analytik společnosti InstaForex
© 2007-2021
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