17.03.2023 10:33 AM
GBP/USD: trading plan for European session on March 17. COT report. The pound is pulling up to a monthly high

Yesterday, there was only one signal to enter the market. Let us take a look at the 5-minute chart to figure out what happened. Earlier, I asked you to pay attention to the level of 1.2108 to decide when to enter the market. The growth and false breakout at this level gave a sell signal. The pair fell by more than 60 pips. I did not wait for any other signals.

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Conditions for opening long positions on GBP/USD:

Today, the UK will not release any reports, so the pound can continue to rise in the first part of the day. The trading plan in the European session will be to buy after a decline and false breakout around the new support level at 1.2124, which is in line with the bullish moving averages. The pound can then rise to the new resistance at 1.2169. After consolidation and a downside test of this range and a stop loss, the price may head towards the new monthly high at 1.2217, where the bulls will face more serious problems. Traders may go long after a breakout, and this will allow the pound to climb to 1.2265, where it is better to lock in profits. If the pair falls and bulls fail to protect 1.2124, the pressure on the pound will return, which will increase the risk of the pair's further decline. In the event of this, it is better to avoid buying the asset until the price is near the next support at 1.2079. There, traders may go long only after a false breakout. Likewise, GBP/USD could be bought on a bounce off the 1.2028 low, allowing a correction of 30 to 35 pips intraday.

Conditions for opening short positions on GBP/USD:

The bears have a low chance of regaining control of the market. Today, their last hope is resistance at 1.2169. The trading plan in the European session will be to sell GBP/USD after a false breakout at this level. After that a sell signal will be made and the quotes may fall to 1.2124. This will also keep the pair in a horizontal channel for the rest of the week. After a breakout and an upward test, pressure on the pair will increase, this will give a sell signal with 1.2079 as the target. The next target is the 1.2028 low, where I will take profit. If the pound/dollar pair increases and bears fail to protect 1.2169, the bears will leave the market. A false breakout through the next resistance at 1.2217 will create a sell entry point. If there is no trading activity there as well, I am going to sell GBP/USD from the 1.2265 high, allowing a bearish correction of 30 to 35 pips intraday.

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COT report:

According to the COT report from February 21, the number of both long and short positions increased. Notably, the data is of zero importance at the moment since it was relevant a month ago. The CFTC has just started recovering after a cyber attack. That is why it is better to wait for fresh statistics. This week, all eyes will be turned to the UK labor market reports and average earnings growth. This will help the BoE to decide on the key interest rate hike amid stable inflation. Household earnings growth may keep inflation at the current high level. Meanwhile, the US is going to disclose its inflation figures, which may prove that Jerome Powell will switch to a looser policy. A risk of the US banking sector collapse, which occurred after the BSV bankruptcy, may force the Fed to alter its view on how long it should raise the benchmark rate until the economy becomes damaged. The recent COT report unveiled that the number of short non-commercial positions increased by 3,277 to 45,475, while the number of long non-commercial positions jumped by 4,898 to 66,891. Against the backdrop, the negative value of the non-commercial net position advance to -21,416 against -19,795 a week earlier. The weekly closing price decreased to 1.2112 from 1.2181.

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Signals of indicators:

Moving Averages

Trading is performed above the 30- and 50-day moving averages, indicating a change in market sentiment.

Note: The author considers the period and prices of moving averages on the one-hour chart which differs from the general definition of the classic daily moving averages on the daily chart.

Bollinger Bands

In case of a decline, the lower limit of the indicator located around 1.2080 will act as support.

Description of indicators

  • Moving average (a moving average determines the current trend by smoothing volatility and noise). The period is 50. It is marked in yellow on the chart.
  • Moving average (a moving average determines the current trend by smoothing volatility and noise). The period is 30. It is marked in green on the graph.
  • MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages). A fast EMA period is 12. A slow EMA period is 26. The SMA period is 9.
  • Bollinger Bands. The period is 20.
  • Non-profit speculative traders are individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
  • Long non-commercial positions are the total number of long positions opened by non-commercial traders.
  • Short non-commercial positions are the total number of short positions opened by non-commercial traders.
  • The total non-commercial net position is a difference in the number of short and long positions opened by non-commercial traders.
Miroslaw Bawulski,
Analytical expert of InstaForex
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