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15.07.202108:42 Forex Analysis & Reviews: GBP/USD: plan for the European session on July 15. COT reports. Pound shows high volatility, but remains in a horizontal channel

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

Yesterday one could observe quite high volatility for the British pound, but in general the market was on the side of the bulls. However, it was not without sell signals, which brought profit thanks to the pair's sharp decline in today's Asian session.

Exchange Rates 15.07.2021 analysis

In yesterday's morning forecast, I drew attention to the 1.3835 level and recommended making decisions from it. Let's take a look at the 5 minute chart and talk about what happened. You could clearly see how the bulls quickly occupied this level, forming a false breakout from it and a signal to open long positions. The first upward movement was around 35 points, after which the bulls rested against the resistance of 1.3869. A false breakout was formed there, so one could safely open short positions. As a result, we saw a movement down 15 points, after which the bulls regained control over the pound.

A small attempt to push the pound to go up in the second half of the day did not bring the expected success and by the middle of the US session the bears regained control over 1.3869, updating this level from the bottom up, which became a signal to open short positions. The downward movement from this area was around 40 points.

Today we are waiting for data on the UK labor market and the unemployment rate, which may lead to a fairly high market volatility. The best option for the bulls will be to form a false breakout at the level of 1.3829, around which trading is being conducted today. This scenario generates a signal to open long positions with the expectation of a recovery to the resistance of 1.3860. However, a breakthrough of this level will occur if the data on the labor market turns out to be better than economists' forecasts. But do not pay special attention to this indicator, since the Bank of England has repeatedly noted that until all programs to support households due to the coronavirus pandemic are completed, real unemployment will remain unknown. Only a breakthrough of 1.3860 and a test of this area from top to bottom can create a new signal to buy GBP/USD and open a direct road to the 1.3889 high. The next target will be the area of 1.3924, where I recommend taking profits. If the pressure on GBP/USD increases after the UK unemployment report, and the bulls are not active in the 1.3829 area, then it is best to postpone long positions until the 1.3802 support has been updated. You can buy the pound immediately on a rebound from a larger low of 1.3771, counting on a rebound 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 1.3860 and the data on the labor market, which may turn out to be worse than the forecasts of economists, may provide help in this. Forming a false breakout there will be a sell signal, which will increase the pressure on the pound and return the bearish character to the market. In this case, the nearest target of the bears will be the support at 1.3829, around which there were already many movements today. Succeeding growth prospects depend on a breakthrough of this level. Therefore, only a reverse test of 1.3829 from the bottom up will lead to creating another entry point into short positions for the purpose of pulling down the pair to 1.3802, and then to further support at 1.3771, where I recommend taking profits. If the bears are not active in the 1.3860 area, then I recommend postponing short positions until the test of a larger high at 1.3889, where you can open short positions immediately on a rebound, counting on a downward correction of 25-30 points within the day.

Exchange Rates 15.07.2021 analysis

The COT reports (Commitment of Traders) for July 6 showed that both long and short positions have increased, which resulted in a growth in the net position. Despite the weak fundamental data on the growth rate of UK GDP in May this year, the pound continues to be in demand after the correction that was observed during the June meeting of the US Federal Reserve. Traders are showing particular interest now after the major downward movement in GBP/USD, and the May data is not an obstacle to building up long positions, as everyone expects more robust economic growth in the summer, even despite the Indian strain of the coronavirus. However, the pound's growth may be limited not only due to a sharp increase in the incidence in the summer, but the fact that the British central bank will not rush to change the program for buying bonds is also a deterrent to the upward trend. Until serious inflationary pressures are noticed in the UK, the Bank of England is unlikely to rush to change 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 rose from 51,596 to 57,232, while short non-commercial positions increased from 33,873 to 35,329. As a result, the non-commercial net position increased from 17,723 to 21,903. Last week's closing price decreased and reached 1.3853 against 1.3878.

Indicator signals:

Trading is carried out in the area of 30 and 50 moving averages, which does not make it possible for us to determine the direction of the market 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 lower border of the indicator in the area of 1.3829 will lead to a new wave of decline in the pound. If the pair grows, the upper border of the indicator at 1.3890 will act as a resistance.

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.

*Prezentowana analiza rynku ma charakter informacyjny i nie jest przewodnikiem po transakcji.

Miroslaw Bawulski,
Ekspert analityczny InstaForex
© 2007-2021
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