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25.05.2021 02:10 PM
GBP/USD: plan for the US session on May 25 (analysis of morning trades)

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

In my morning forecast, I recommended making a decision based on the level of 1.4201 and opening short positions from it in the expectation of a market reversal in the short term. Let's look at the 5-minute chart and talk about what happened. In the first half of the day, we could see the bulls trying to get above the resistance of 1.4201, but nothing good came of it. The formation of a false breakout led to the formation of a signal to open short positions, which returned the market to the control of sellers. At the time of writing, the pound's downward movement was about 50 points.

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Given that the technical picture of the pair did not change in the first half of the day, the trading scenario for the US session remains relevant. The main task of buyers of the pound will be to keep under control the support of 1.4141, to which the pair is now gradually descending. It is quite possible that the data on the US economy, provided that they are better than the forecasts of economists, will lead to the formation of a false breakdown. It will form another signal to open long positions in the continuation of the bull market that we have seen since the beginning of this month. In this scenario, you can again count on a re-update and a resistance test of 1.4201, which will not be so easy to break above in the second half of the day. Only very weak data on the consumer confidence indicator in the US will give an impulse to build up new long positions, and a test of the level of 1.4201 already from top to bottom on the volume will open a direct road for GBP/USD to the highs of 1.4253 and 1.4310, where I recommend taking the profits. If the pressure on the pound returns, and the bulls do not show activity in the support area of 1.4141, I recommend not to rush to buy. The optimal scenario will be long positions immediately on the rebound from the support of 1.4093, or even lower - from the level of 1.4041 in the expectation of an upward correction of 25-30 points within the day.

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

Sellers managed to defend the resistance of 1.4201 in the first half of the day, and as long as trading is conducted below 1.4201, the market will remain under their control. During the US session, the bears need to think carefully about how to return the support of 1.4141 to control. Only a break and consolidation below this level with a reverse test from the bottom up will lead to the formation of a good entry point into short positions in the expectation of a return of GBP/USD to the area of 1.4093, where I recommend taking the profits. The 1.4041 level will be a more distant target. If we see a second rise in the pound in the second half of the day, the bears will again have to think about how to defend the resistance of 1.4201. Only the formation of a false breakout (similar to the one I described above) will lead to the formation of an entry point into short positions. If there is no activity of sellers in this range, it is best to postpone short positions until the update of a large local maximum in the area of 1.4253, or even higher - from the maximum of 1.4310 in the expectation of a downward correction of 20-25 points within the day.

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Let me remind you that the COT reports (Commitment of Traders) for May 18 recorded a reduction in long positions and a slight increase in short ones. Insufficiently strong inflation in the UK allows the members of the Bank of England committee to adhere to an ultra-soft monetary policy, on which the further direction of the British pound now depends. The fight against COVID is over, and no one remembers it in England, especially since the economy has been fully opening since the beginning of the summer, which is a good bullish boost for retail sales and inflation. Against this background, the upward potential of the pound remains quite high, you just need to wait for a little. Given that the fundamental data recently does not significantly affect the direction of the pair, I recommend paying more attention to the statements of representatives of the Bank of England and its Governor, Andrew Bailey. The COT report indicates that long non-commercial positions have declined from the level of 64,947 to the level of 63,027. However, this is more like profit-taking than abandoning long positions due to a change in market direction. At the same time, short non-profit positions rose from 36,771 to 38,127, bringing the non-profit net position down to 24,900 from 28,176 a week earlier. The closing price of last week did not change significantly and amounted to 1.41479 against 1.41308.

Signals of indicators:

Moving averages

Trading is conducted around 30 and 50 daily averages, which indicates the sideways nature of the market after the unsuccessful attempt of the bulls to get above the high of 1.4201.

Note. The period and prices of the 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 upper limit of the indicator in the area of 1.4195 will lead to a new wave of growth of the pound. A break of the lower limit in the area of 1.4141 will increase the pressure on 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.
Miroslaw Bawulski,
Analytical expert of InstaForex
© 2007-2024
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