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20.01.202115:30 Forex Analysis & Reviews: GBP/USD: plan for the US session on January 20 (analysis of morning trades)

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

In my morning forecast, I paid attention to the level of 1.3658 and recommended opening positions from it if several conditions are met. Let's take a look at the 5-minute graph and analyze the signals that were generated. A break and consolidation above 1.3658, followed by a test of this level from top to bottom, led to the formation of an excellent signal for entering the market. As a result of this entry, it was possible to take about 40 points of profit, as the goal in the area of the annual maximum of 1.3701 was very quickly achieved. The growth of the pound was supported by good fundamental indicators for inflation. After the formation of a false breakout in the resistance area of 1.3701, a sell signal for the euro was formed, which is still valid at the time of writing. I also paid attention to this probability in the morning forecast. I have marked the area of the false breakout on the chart.

Exchange Rates 20.01.2021 analysis

Buyers of the pound are still focused on stopping the downward correction, which is now observed from the level of 1.3701. However, I recommend counting on long positions only after the decline and the return of GBP/USD to the area of the morning support of 1.3658. The formation of a false breakout will be another signal to buy the pound. An equally important task remains to break the annual highs in the area of 1.3701, which was not possible to do with the fourth attempt this month. Only a consolidation above 1.3701 will open a direct road to the levels of 1.3750 and 1.3803, where I recommend taking the profits. If there is no bull activity in the support area of 1.3658, you can safely buy the pound in the area of 1.3611, where there are also moving averages that play on the side of buyers.

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

The bears managed to prove themselves in the area of the annual maximum, however, the situation is quite shaky. If the bulls manage to break through this range, it is better not to rush with short positions. In this case, the nearest stop of the upward trend will occur near the maximum of 1.3750 or even higher, in the area of 1.3803, from where you can sell the pound with the aim of a small downward correction of 20-25 points within the day. An equally important task for the bears will be to regain control of the support of 1.3658. Only a consolidation below this level with its reverse test from the bottom up forms a signal to open short positions to return to the minimum of 1.3611, where I recommend fixing the profit. There are also moving averages that play on the side of buyers of the pound.

Exchange Rates 20.01.2021 analysis

Let me remind you that in the COT reports (Commitment of Traders) for January 12, the growth of long and short positions was recorded, but the first ones turned out to be more, which led to an increase in the delta. Long non-commercial positions increased from 35,526 to 47,935. At the same time, short non-commercial positions increased from 31,861 to 34,993. It can be seen that sellers turned out to be much less than new buyers. As a result, the non-profit net position rose and amounted to 12,942 against 3,665 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, for which there is no vaccine yet. The demand for the pound is limited by quarantine measures in the UK, which will be lifted sooner or later after the situation with infections has stabilized. The recent failure of the Bank of England from the introduction of negative interest rates and the pound earlier this year have brought many large medium-term buyers back into the market, hoping for a continuation of the bull market this spring.

Signals of indicators:

Moving averages

Trading is conducted above 30 and 50 daily averages, which indicates a further upward movement of the pound.

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

In the case of a decline in the pair, the lower limit of the indicator in the area of 1.3611 will provide support.

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.

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