Relevance up to 11:00 2022-01-20 UTC+00
To open long positions on GBP/USD, you need:
Nothing particularly interesting happened in the first half of the day. Let’s look at the 5-minute chart and figure out what we needed to pay attention to. Only by the middle of the day, the bulls achieved a resistance update of 1.3620, which preserves the chance for a further upward correction of the pair in the short term. From a technical point of view, there have also been minor changes. And what were the entry points for the euro this morning?
The entire focus of traders, of course, will be on the hearing of the Treasury select committee and the speech of the Governor of the Bank of England, Andrew Bailey. Only after these events, a larger surge in volatility is expected and the pound may rush up against the US dollar. The main goal of the bulls for today remains to consolidate above the resistance of 1.3620. A test of this level from top to bottom will lead to the formation of the first buy signal to continue the upward correction directed at 1.3657. A breakdown of this area together with weak indicators on the American real estate market will give an additional entry point, which will strengthen the position of buyers in the expectation of updating 1.3693 and 1.3739, where I recommend fixing the profits. In the scenario of a decline in GBP/USD during the US session, it is best to postpone purchases to the level of 1.3574, from where it will be possible to observe more aggressive actions of bulls – this is their last chance to keep the market under their control in the short term. Only the formation of a false breakdown at 1.3574 will give an entry point based on the recovery of GBP/USD. You can buy the pound immediately on a rebound from 1.3532, or even lower – from a minimum of 1.3496, counting on a correction of 20-25 points within the day.
To open short positions on GBP/USD, you need:
Bears are not very active yet, as they are afraid of statements prepared today by the Governor of the Bank of England, Andrew Bailey. Taking profits on short positions also allows the pound to strengthen its positions. The primary task of the bears for today remains the return of the pound to the level of 1.3620. This will lead to the formation of a false breakdown and a signal to open short positions in the continuation of the weekly downward correction. In this case, the target will be 1.3574 support. Taking control of this level will give a new additional entry point with the prospect of a decline in GBP/USD already to 1.3532 and 1.3496, where I recommend fixing the profits. If the pair grows during the US session and weak data on the volume of construction permits issued and the number of new foundations laid in the US, it is best to postpone sales until the next major resistance of 1.3657. I also advise you to open short positions there only in case of a false breakdown. You can sell GBP/USD immediately for a rebound from 1.3693, or even higher – from a new high in the area of 1.3739, counting on the pair’s rebound down by 20-25 points inside the day.
The COT reports (Commitment of Traders) for January 11 recorded an increase in long positions and a reduction in short positions – which indicates the continued attractiveness of the pound after the Bank of England raised interest rates at the end of last year. If you look at the overall picture, the prospects for the British pound look pretty good, and the observed downward correction makes it more attractive. The Bank of England’s decisions continues to support buyers of risky assets in the expectation that the regulator will continue to raise interest rates this year, which will push the pound even higher. High inflation remains the main reason why the Bank of England will continue to tighten its monetary policy. Last week, Federal Reserve Chairman Jerome Powell said that he would not shape events and rush to raise interest rates, especially given the sharp decline in retail sales in December last year, which should cool inflationary pressure a little. This led to a decrease in demand for the US dollar, which will allow buyers of the pound to continue building an upward trend. The COT report for January 11 indicated that long non-commercial positions increased from the level of 25,980 to the level of 30,506, while short non-commercial positions decreased from the level of 65,151 to the level of 59,672. This led to a change in the negative non-commercial net position from -39,171 to -29,166. The weekly closing price rose from 1.3482 to 13579.
Signals of indicators:
Trading is conducted around 30 and 50 daily moving averages, which indicates an attempt by the bulls to seize the initiative
Note: The period and prices of 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.
A breakthrough of the upper limit of the indicator in the area of 1.3620 will lead to a new wave of growth of the pound. A breakthrough of the lower limit of the indicator in the area of 1.3574 will lead to a larger drop in 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.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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