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20.05.2022 01:19 PM
GBP/USD: plan for the American session on May 20 (analysis of morning deals). Volatility has decreased significantly. The pound remains within the side channel

In my morning forecast, I paid attention to the levels of 1.2444 and 1.2509 and recommended making decisions on entering the market. Let's look at the 5-minute chart and figure out where and how it was possible and necessary to enter the market. Given the low volatility during the European session after the release of retail sales data in the UK, it was not possible to reach the levels I indicated. Because of this, I did not receive signals to enter the market. For the second half of the day, the technical picture has not changed, as well as the strategy has not changed. And what were the entry points for the euro this morning?

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

If the pressure on the pound returns in the afternoon, only the formation of a false breakout at 1.2444 will lead to a signal to open long positions, counting on the continuation of the bull market with an increase to the resistance of 1.2509. It is possible to expect a sharper jerk of the pair, but only after fixing above this range with a reverse test from top to bottom, which will lead to the demolition of sellers' stop orders and the growth of GBP/USD to new weekly highs in the area of 1.2574 and 1.2633, where I recommend fixing the profits. The more distant target will be the 1.2692 area. In the case of a decline in the pound and the absence of buyers at 1.2444, and such a scenario seems to be more likely, the pair will be squeezed within a wide side channel, from which it will be quite difficult to break out. Therefore, I advise you not to rush shopping. It is best to enter the market after a false breakdown in the area of 1.2390. You can buy GBP/USD immediately for a rebound only from the lower border of the 1.2339 channel, or even lower - around 1.2280 and only for a correction of 30-35 points inside the day.

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

In the current reality, only the protection of 1.2509 will help the bears to return to the market to build a downward correction for the pair's return to the area of 1.2444. A false breakout at 1.2509 will be an ideal condition for opening short positions in the expectation of consolidation below 1.2444. A breakout and a reverse test from the bottom up of this range form an additional sell signal, which can very quickly return the pound to the low of 1.2390, opening a direct road to 1.2339. A more distant target will be the 1.2280 area, the test of which will cross out the upward trend for the pair. But hopes for the implementation of this scenario without good fundamental statistics on the United States today are unlikely to succeed. With the option of GBP/USD growth and lack of activity at 1.2509, another upward jerk may occur against the background of the demolition of stop orders. In this case, I advise you to postpone short positions until the next major resistance of 1.2574. I also advise you to open short positions there only in case of a false breakdown. It is possible to sell GBP/USD immediately for a rebound from the maximum of 1.2633, counting on the pair's rebound down by 30-35 points within a day.

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The COT report (Commitment of Traders) for May 10 recorded a reduction in long positions and another increase in short positions, which led to a further increase in the negative delta. The presence of several problems in the UK economy and a rather difficult situation with inflation is forcing investors to get rid of the British pound, which is very seriously losing its attractiveness against the background of demand for safe-haven assets and more profitable instruments. The monetary policy of the Federal Reserve System aimed at tightening the cost of borrowing will continue to support the US dollar, pushing the British pound lower and lower. The actions of the Bank of England to raise interest rates have not yet brought the proper result, and talk that due to serious economic difficulties, the regulator may suspend the normalization of monetary policy altogether frightens investors even more. As I have repeatedly noted, future inflation risks are now quite difficult to assess due to the difficult geopolitical situation, but the consumer price index will continue to grow in the coming months. The situation in the UK labor market, where employers are forced to fight for every employee by offering higher and higher wages, is also pushing inflation higher and higher. The COT report for May 10 indicated that long non-commercial positions decreased by -4,067 to the level of 29,469, while short non-commercial positions increased by 1,718 to the level of 109,067. This led to an increase in the negative value of the non-commercial net position from the level of -73,813 to the level of -79,598. The weekly closing price decreased from 1.2490 to 1.2313.

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Signals of indicators:

Moving averages

Trading is conducted above 30 and 50 daily moving averages, which indicates an active attempt by bulls to continue growth.

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.

Bollinger Bands

In the case of a decline, the lower limit of the indicator around 1.2444 will act as 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 use the futures market for speculative purposes and to 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.
Miroslaw Bawulski,
Analytical expert of InstaForex
© 2007-2024
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