20.01.202108:57 Forex Analysis & Reviews: GBP/USD: plan for the European session on January 20. COT reports (analysis of deals). Bulls pushed pound to resistance at 1.3658, now aiming for a breakout

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

Even in the first half of the day, the bulls actively defended the 1.3611 area several times, but, unfortunately, we could not wait for a false breakout there, as well as for a correct entry point to short positions. Then a signal to buy the pound was created, which I drew attention to in my forecast for the US session. I marked the long entry point on the 5 minute chart. However, in fairness, it was quite difficult to sit out this signal, since the pair fell below the 1.3611 level many times and a downward correction could appear at any moment. Whoever left this signal did the right thing, as the risk of the pound's decline was quite high. Those who still sat there, managed to wait for an update of the target value in the 1.3658 area and earn about 45 points of profit.

Buyers of the pound are currently focused on resistance at 1.3658, as the pair's succeeding direction depends on it. Only a breakout and a test of this area from top to bottom, similar to the buy deal, which I mentioned above, will make it possible for us to expect the pound to rise to an annual high of 1.3701, where I recommend taking profits. A good UK inflation report, which may turn out to be better than economists' forecasts, will help in implementing this scenario. The breakout of 1.3701 will hit a number of buyers' stop orders and lead to a new strong bullish momentum, with an exit to the highs of 1.3750 and 1.3803, where I recommend taking profits. If we observe a downward correction of the pair in the first half of the day, then it is best not to rush to buy, but wait for an update of support at 1.3611 and open long positions when a false breakout is formed. Moving averages also pass there, playing on the side of the bulls. In the absence of activity at this level, or with very weak inflationary indicators, I recommend postponing long positions until the low of 1.3571 has been tested, where you can open longs immediately on a rebound, counting on an upward correction of 25-30 points within the day.

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

Bears will defend resistance at 1.3658 in every possible way, since the pair's succeeding direction depends on it. Forming a false breakout there in the first half of the day will be a signal to open short positions for the purpose of a downward correction to the support area of 1.3611, surpassing it will certainly lead to a sharp sale of the pound towards a low of 1.3571, where I recommend taking profits. Moving averages pass at the 1.3611 level, so the bears need to try very hard. A weak UK inflation report will increase the pressure on the pound. If the bears ignore resistance at 1.3658, then it would be best to postpone short positions until this year's high at 1.3701 has been updated, from which one can expect a downward correction of 30-40 points within the day.

The Commitment of Traders (COT) report for January 12 recorded an increase in both long and short positions, but there were more of the first ones, which caused the delta to increase. Long non-commercial positions increased from 35,526 to 47,935. At the same time, short non-commercial positions increased from 31,861 to 34,993. We can see that sellers turned out to be much less than new buyers. As a result, the non-commercial net position rose to 12,942 against 3,665 a week earlier. All this suggests that traders continue to bet on the strengthening of the pound, even in the face of the new Covid-19 strain, for which there is no vaccine yet. The demand for the pound is limited by quarantine measures in the UK, which will sooner or later be canceled after the infection situation stabilizes. The Bank of England's recent refusal to introduce negative interest rates and the pound's decline earlier this year have brought many large medium-term buyers back into the market, expecting a continuation of the bull market this spring.

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates further growth for the pair.

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

A breakout of the upper border of the indicator around 1.3658 will lead to a new wave of growth. In the event of a decline, support will be provided by the lower border of the indicator at 1.3600.

Description of indicators

• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in 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.
• Non-commercial short positions represent the total short open position of non-commercial traders.
• Total non-commercial net position is the difference between short and long positions of non-commercial traders.