09.01.202514:08 Forex Analysis & Reviews: GBP/USD: Trading Plan for the U.S. Session on January 9th (Analysis of Morning Trades)

In my morning forecast, I highlighted the level of 1.2265 and planned to make trading decisions based on it. Let's examine the 5-minute chart to analyze what happened. A decline and the formation of a false breakout at this level provided a good buying opportunity for the pound, resulting in a correction of over 30 points for the pair. The technical outlook for the second half of the day has been completely revised.

To Open Long Positions on GBP/USD:

Considering the strong and rapid selling of the pound, betting on its growth in the second half of the day will be challenging. Positive statements from Federal Reserve representatives might provide some support, but relying on this is not advisable. Purchases should only be considered during more significant declines. Speeches from FOMC members Patrick T. Harker and Michelle Bowman, known advocates for combating inflation, are expected to put additional pressure on GBP/USD.

If the pair continues to decline, I anticipate buyer activity around the newly formed support at 1.2243, which was established earlier today. A false breakout at this level will create a good entry point for purchases, targeting a slight recovery of GBP/USD toward the resistance at 1.2298, where the pair is currently trading. A breakout and a retest from above at this range will provide a new entry point for long positions, aiming for an update of 1.2334, where buyers are likely to face challenges. The ultimate target will be 1.2376, where I plan to take profits.

If GBP/USD declines and there is no activity from bulls at 1.2243—an increasingly likely scenario—the pound could fall even further. In this case, only a false breakout around the next support at 1.2190 would be a suitable condition for opening long positions. I plan to buy GBP/USD immediately on a rebound from the 1.2157 low, targeting a 30–35 point correction intraday.

To Open Short Positions on GBP/USD:

Pound sellers control the market, and only a slight correction may be needed for further activity, potentially triggered by US data. A false breakout near 1.2298 would be sufficient to open new short positions, targeting the 1.2243 level—new yearly lows. A breakout and a retest from below at this range will trigger stop-loss orders, paving the way to 1.2190, indicating a strengthened bearish market. The ultimate target will be 1.2157, where I will take profits.

If demand for the pound resurfaces after the speeches from Federal Reserve representatives and sellers fail to act around 1.2298, nothing critical will occur. Bears are likely to retreat to the resistance at 1.2234. I will sell there only after a false breakout. If there is no downward movement there, I will look for short positions on a rebound around 1.2376, aiming for a 30–35 point downward correction intraday.

The Commitment of Traders (COT) report dated December 31 indicates an increase in both long and short positions, suggesting that traders maintained a cautious stance following the Bank of England's year-end meeting. This cautious approach is likely due to uncertainties surrounding the central bank's future policies. Attention is now shifting towards the inauguration of Donald Trump and its potential implications for UK interest rates. If Trump's policies are less restrictive towards the UK, the pound may strengthen. Conversely, if trade tensions rise, significant gains in the GBP/USD pair may be limited in the near term. The latest COT report shows that long non-commercial positions increased by 1,644 to 86,202, while short non-commercial positions rose by 132 to 65,367, resulting in a net increase of 1,226 in the gap between long and short positions.

Indicator Signals:

Moving Averages:

Trading is conducted below the 30- and 50-day moving averages, signaling further declines for the pair.

Bollinger Bands:

In case of a decline, the lower boundary of the indicator around 1.2270 will serve as support.

Indicator Descriptions:

• Moving Average (MA): A trend-following indicator smoothing price action. Periods: 50 (yellow on the chart) and 30 (green on the chart).
• MACD: Fast EMA – period 12; Slow EMA – period 26; SMA – period 9.
• Bollinger Bands: Period 20.
• Non-commercial traders: Speculators such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes.
• Net Non-commercial Position: The difference between long and short positions held by non-commercial traders.