04.01.202115:39 Forex Analysis & Reviews: GBP/USD: plan for the American session on January 4 (analysis of morning deals)

To open long positions on GBPUSD, you need to:

In the first half of the day, several signals were formed to enter the market, however, this did not lead to the expected result. Even in the morning forecast, I paid attention to the level of 1.3688 and recommended that you make a decision from it. The 5-minute chart clearly shows a breakout and consolidation above this range, which led to the formation of a signal to buy the pound. Unfortunately, a major increase in the pound did not take place, and after the PMI data, which turned out to be even better than economists' forecasts, the pair returned to the level of 1.3688, testing it from the bottom up, which formed a sell signal for the pound. The downward movement was no more than 20 points, after which the trade again moved back to the area of 1.2688, equalizing the strength of both.

Exchange Rates 04.01.2021 analysis

The first major resistance has now shifted to the area of 1.3701, on which the further bull market depends. A breakout and consolidation above this level with a test of it from top to bottom forms a good entry point into the continuation of the bull market. However, the growth of the pound may be limited by data on activity in the manufacturing sector of the United States, which are expected today in the afternoon. If the reports turn out to be worse than economists' forecasts, we can expect a larger upward movement of the pound above the resistance of 1.3701 with an exit to the maximum of 1.3750. The longer-term target of the bulls remains the area of 1.3803, where I recommend taking the profits. If the pressure on the pound returns today during the US session, it is best to wait for a downward correction and open long positions after the formation of a false breakout in the support area of 1.3629, where the moving averages play on the side of buyers of the pound. I recommend buying GBP/USD immediately for a rebound only from the minimum of 1.3573, based on an upward correction of 25-30 points within the day.

To open short positions on GBPUSD, you need to:

Although the sellers of the pound did not cope with the task in the first half of the day, they still managed to form a new resistance of 1.3701, which will be emphasized during the American session. The formation of a false breakout in the second half of the day will be a signal to open short positions with the aim of a downward correction to the area of the minimum of 1.3629, where the moving averages play on the side of buyers of the pound. A breakout of this range and a test of it from the reverse side (by analogy with the sale, which I analyzed just above) forms a signal to open short positions in GBP/USD already in the expectation of updating the minimum of 1.3573, where I recommend fixing the profits. If the pound continues to gradually strengthen its positions after today's reports on manufacturing activity in the United States, then it is best to postpone short positions until the high of 1.3750 is updated or sell the pair immediately for a rebound from the resistance of 1.3803 in the expectation of a downward correction of 30-40 points within the day.

Exchange Rates 04.01.2021 analysis

Let me remind you that COT reports (Commitment of Traders) for December 21 recorded an increase in interest in the British pound, both buyers and sellers. Long non-commercial positions increased from 35,128 to 37,550. At the same time, short non-commercial positions remained practically unchanged and increased from 31,060 to 31,518. As a result, the non-commercial net position remained positive and grew to 6,032 against 4,068 a week earlier. All this suggests that traders continue to bet on the strengthening of the pound even in the face of a new strain of COVID-19, which was first recorded in the UK. Everyone believes in the vaccine and that the beginning of this year, once the quarantine measures are lifted, will be associated with strong economic growth, which will give the market a new bullish momentum and lead to the pound updating new annual highs. Additional stimulus by the Bank of England may somewhat smooth the upward trend in the pound, but it may not be, since the trade agreement with the EU was still concluded at the very last moment.

Signals of indicators:

Moving averages

Trading is conducted above 30 and 50 daily averages, which indicates the probability of further growth of the pound.

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 the classic daily moving averages on the daily chart D1.

Bollinger Bands

A break of the lower limit of the indicator in the area of 1.3630 will increase the pressure on the pair. A burst of the upper limit in the area of 1.3701 will lead to a new wave of growth of the pound.

Description of indicators

  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
  • MACD indicator (Moving Average Convergence / Divergence - moving average convergence / divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
  • Non-profit 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 the short and long positions of non-commercial traders.

*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.

Miroslaw Bawulski,
Esperto analitico di InstaForex
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