29.07.202108:43 Forex Analysis & Reviews: GBP/USD: plan for the European session on July 29. COT reports. Pound broke through to the next local highs after the publication of the Fed's decision on monetary policy

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

Yesterday's Federal Reserve meeting was not something new for investors, so the demand for risky assets, including the British pound, has returned. Nothing interesting happened for the pair in the first half of the day. Due to the lack of important fundamental statistics, GBP/USD did not reach any of the levels I indicated, so no input signals were formed. Several attempts to push the GBP/USD ended in the resistance area of 1.3894, and the level I indicated was in the area of 1.3896. During the US session, after reviewing the technical picture, one good signal was formed to buy the pound. It occurred after the formation of a false breakout at the level of 1.3854 and even before the US central bank's decision was announced, the growth was about 30 points. The committee's decision to leave everything as it is only strengthened the position of the bulls.

Exchange Rates 29.07.2021 analysis

Today we do not have important fundamental data for the UK and only the report on the house price index from Nationwide will attract attention. It is unlikely that this indicator will seriously affect the pound's position, so you should not remove a large value from it. Much will depend on the results of the Fed meeting. If Fed Chairman Jerome Powell hints at a cut in the repurchase program in the near future, the pressure on the pound will return. In the meantime, the bulls are focused on the resistance at 1.3896, surpassing it will open the way to new local highs. A breakthrough and consolidation at this level with its reverse test from top to bottom will push the pound to buy and rise to the area: 1.3937 and 1.3978. The next target will be resistance at 1.4019, where I recommend taking profits. In case the pair falls in the first half of the day, the bulls' attention will move to support at 1.3854. The formation of 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 area of 1.3854, it is best to postpone long positions until the 1.3814 low is renewed, slightly above which there are moving averages playing on the side of the bulls. I recommend buying GBP/USD immediately on a rebound only from a low like 1.3774, counting on an upward correction of 25-30 points within the day.

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

The initial task of the bears is to protect the resistance at 1.3937. Considering that the bears have already missed this month's high without much effort, only the formation of a false breakout there will return temporary pressure to the pound, which will form the first signal to open short positions in hopes that the pair would fall to the support area of 1.3896. A breakdown of this level will depend on the data on US GDP, but it will be released in the afternoon, so we shouldn't expect bears to be significantly active against such a bullish trend during the European session. The test from the bottom up at 1.3896 will hit the bulls' stop orders, which will push the pound to the next support at 1.3854, where I recommend taking profits. The 1.3814 area is still the next target. If the bears are not active in the 1.3937 area, I recommend postponing short positions until the next major resistance at 1.3978, or opening short positions in GBP/USD immediately after a rebound from 1.4019, counting on a downward correction of 25-30 points within the day.

Exchange Rates 29.07.2021 analysis

I recommend for review:

The Commitment of Traders (COT) report for July 20 recorded a slight reduction in long positions and a good rise in short ones. Despite the large fall in the pound, as we can see on the chart, the downward movement was quickly won back at the end of last week, but this report does not take this into account, therefore it seems that the pound was completely under the control of bears, but this is not the case. The panic after the lifting of all quarantine restrictions in the UK and the full opening of the economy occurred at a time when, after all this, a sharp increase in infections with a new strain of coronavirus began in England, and politicians argued with each other about how to respond to this. But then, by the middle of the week, the situation stabilized, and the pound managed to recover all its losses against the US dollar. Traders still expect Bank of England officials to start talking more about plans to cut back on the bond buying program soon. I have repeatedly drawn attention to the fact that traders pay special attention and take an interest in every major fall in GBP/USD downward, 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 there has not been a serious departure from the inflation target in the UK, 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 44,686 to 44,223, while short non-commercial positions rose from 36,717 to 47,720. As a result, the non-commercial net position turned negative at -3,496. against 7,969. Last week's closing price fell from 1.3886 to 1.3668

Indicator signals:

Trading is carried out above 30 and 50 moving averages, which indicates the continued growth of the pound in the short term.

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

Surpassing the upper border of the indicator in the area of 1.3935 will lead to a new wave of growth of the pound. A breakthrough of the lower border of the indicator in the area of 1.3896 will increase the pressure on the pair.

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.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Miroslaw Bawulski,
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