30.03.2023 08:21 AM
GBP/USD: trading plan for European session on March 30. Commitment of Traders. GBP unable to climb above 1.2350

Yesterday, there was only one entry point. Now, let's look at the 5-minute chart and figure out what actually happened. In my morning article, I turned your attention to 1.2296 and recommended making decisions with this level in focus. The pair declined to 1.2296 but it lacked just a few points for a test of this level and a buy signal. So, there was no entry point. After a rise in the afternoon, a false breakout of 1.2344 gave a sell signal. The pound sterling sank by 30 pips. However, bears failed to initiate a steady downward movement.

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When to open long positions on GBP/USD:

In the morning, there will be no drivers that could bolster further upward movement. So, the pair will hardly be able to consolidate at monthly highs until the end of the week and month. For this reason, it is better to act quite cautiously and open long positions only after a decline to 1.2296. A false breakout there may give a buy signal with the prospect of a return to 1.2355 – a new monthly high formed yesterday. After a rise and a downward test of this level, GBP/USD could climb to 1.2395. It will be quite hard for the bulls to push the pair above this level. A breakout of this level may help the pair climb to 1.2443 where I recommend locking in profits. If the bulls fail to push the pair to 1.2296, the pressure on the pound sterling will return, which will lead to a downward correction to 1.2242, the lower border of the sideways channel. In this case, I would advise you to open long positions there only after a false breakout. You could buy GBP/USD at a bounce from 1.2192, keeping in mind an upward intraday correction of 30-35 pips.

When to open short positions on GBP/USD:

For the third time in a row, sellers have failed to push the pair below the March highs, which indicates the likelihood of a larger downward correction at the end of the month. It may occur after another unsuccessful attempt to grow above 1.2355. Only a false breakout there could provide an excellent sell signal against the trend. GBP/USD is likely to dip to the support level of 1.2296 where bulls may again enter the market. A breakout and an upward retest of this level will exert pressure on the pound sterling, creating new entry points into short positions. The pair may fall to 1.2242, the lower border of the sideways channel. A more distant target is located at a low of 1.2192. The pair could reach this level only in the case of very strong US data. If GBP/USD rises and bears show no energy at 1.2355, which is less likely, bulls will maintain control. The pound sterling will appreciate to a new high of 1.2395. 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 1.2443, keeping in mind a downward intraday correction of 30-35 pips.

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COT report

According to the COT report for March 21, there was a drop in both long and short positions. The March meeting of the Bank of England did not bring any surprises. As widely expected, the regulator raised the interest rate, hinting at further monetary tightening. this is hardly surprising given that inflation in the UK remains high. Judging by the latest data, consumer prices rose in February, forcing the regulator to stock a hawkish stance. Given that many expect a pause in the monetary tightening by the Fed, the pound sterling could maintain its upward movement. The latest COT report showed that short non-commercial positions decreased by 498 to 49,150, while long non-commercial positions declined by 3,682 to 28,652. It led to an increase in the negative delta of the non-commercial net position to -20,498 versus -17,314 a week earlier. The weekly closing price climbed to 1.2241 against 1.2199.

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Indicators' signals:

Trading is carried out near the 30 and 50 daily moving averages, which indicates the possibility of a correction.

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 EUR/USD declines, the indicator's lower border at 1.2296 will serve as support.

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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