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22.03.2023 08:50 AM
GBP/USD: trading plan for European session on March 22. Commitment of Traders. GBP settles at monthly highs

Yesterday, there were several excellent entry points. Now, let's look at the 5-minute chart and figure out what actually happened. In my morning article, I turned your attention to 1.2227 and recommended making decisions with this level in focus. A decline and a false breakout of this level led to a buy signal. The pair rose by more than 35 pips. In the afternoon, the breakdown and the reverse test of 1.2227 gave a sell signal, after which the pound sank by more than 45 points. In the afternoon, a breakout and the upward retest of 1.2227 provided entry points into short positions. The pound sterling sank by more than 45 pips.

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When to open long positions on GBP/USD:

The UK will unveil its Consumer Price Index today. The figure may affect the BoE's key rate decision. The BoE meeting is scheduled for tomorrow. The decision is sure to have an impact on the trajectory of GBP/USD. If inflation drops more than expected, the pressure on the pair will increase. With slowing inflation, the BoE could take a pause in monetary tightening. If the Consumer Price Index remains above the double-digit level, the Bank of England will have no option but to raise rates further. It is better to open long positions today after the decline from 1.2181, the lower border of the sideways channel. A false breakout of this level could create new entry points into long positions with a prospect of a jump to 1.2232, the middle of the sideways channel. Currently, trading is carried out at this level. The moving averages are passing there too, indicating market equilibrium. If the pair consolidates there and undertakes a downward retest of 1.2232, GBP/USD could reach a new monthly high of 1.2278, formed yesterday. At this level, the bulls will again face serious problems. Following a breakout of this level, the pair could touch 1.2328 where I recommended locking in profits. If the bulls fail to push the pair to 1.2181, which is unlikely before the Fed's rate decision, the pressure on the pound will return. In this case, I would advise you not to rush into purchases and open long positions only near the support level of 1.2134 and only after a false breakout. You could buy GBP/USD at a bounce from a low of 1.2080, keeping in mind an upward intraday correction of 30-35 pips.

When to open short positions on GBP/USD:

Sellers have a chance to regain the upper hand. They need to take control of the resistance level and 1.2232, the middle of the sideways channel. The moving averages are also passing at this level. A false breakout of this level will give an excellent signal to open short positions. GBP/USD could slide to 1.2181, the lower border of the sideways channel. At this level, bulls are likely to try to enter the market. Only a breakout and an upward retest of 1.2181 will increase the pressure on the pound, providing new entry points into short positions with a drop to 1.2134. A more distant target will be a low of 1.2080 where I recommend locking in profits. If GBP/USD rises and bears show no energy at 1.2232, which is likely, the pound sterling may drop to 1.2278, the upper border of the sideways channel. Only a false breakout of this level will give an entry point into short positions. If there is no downward movement there, you could sell GBP/USD at a bounce from a high of 1.2329, keeping in mind a downward intraday correction of 30-35 pips.

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COT report

The COT report for March 7 logged a rise in both long and short positions. However, this data is not relevant as the CFTC is still recovering after a cyber-attack. All that's left is to wait for fresh reports. This week, the Fed and the Bank of England will hold monetary policy meetings and make a decision on interest rates. The BoE is expected to stick to a hawkish stance due to persistent inflation. If the Fed gets dovish and the BoE does not, we will see GBP/USD reaching a new monthly high. According to the latest COT report, long non-commercial positions increased by 1,227 to 66,513. Short non-commercial positions rose by 7,549 to 49,111. The non-commercial net position came in at -17,141 versus -21,416. The weekly closing price fell to 1.1830 from 1.2112.

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Indicators' signals:

Trading is carried out near the 30 and 50 daily moving averages, which indicates market uncertainty.

Moving averages

Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

If GBP/USD declines, the indicator's lower border at 1.2181 will serve as resistance.

Description of indicators

  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked 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 the short and long positions of non-commercial traders.
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