03.09.202108:41 Forex Analysis & Reviews: GBP/USD: plan for the European session on September 3. COT reports. Pound broke out to new highs from the horizontal channel, but will bulls have enough strength to stay there?

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

Yesterday, the British pound broke out from the horizontal channel to reach new highs, but will the bulls have enough strength to stay there? there was no significant activity in the GBP/USD pair in the first half of the day, however, closer to the second half of the day, a false breakout was formed at the level of 1.3791. Let's take a look at the 5 minute chart and figure it out. It can be clearly seen how the bears managed to return under the 1.3791 level and formed an excellent entry point into short positions from there. However, no matter how hard they tried, they failed to achieve a major downward movement. After a slight correction of 10 points, the bulls managed to regain control of 1.3791 and build a new intraday upward trend. Unfortunately, the reverse test of 1.3791 did not take place, therefore, there was no signal for entering the market with long positions.

Today, traders will focus on the PMI report for the UK services sector in the morning. If the indicator exceeds the forecasts of economists, it is a direct signal for the buildup of long positions. In this case, GBP/USD bulls need to settle above the resistance of 1.3858. Only a test of this level from top to bottom will create a good entry point into long positions with the goal of entering a new weekly high at 1.3893 and then at 1.3926, where I recommend taking profits. The next target is still the area of 1.3955, which will be reached only in case of a very weak report on the US labor market. A more acceptable strategy for buying the pound would be its decline in the first half of the day. The optimal scenario for opening long positions is to form a false breakout at the level of 1.3818. There are also moving averages, playing on the side of the bulls, which can help the pound with continuing the upward trend. If the pressure on GBP/USD returns in the first half of the day, and the bulls show nothing in the support area of 1.3818, the optimal scenario will be long positions from the level of 1.3782. But you can also buy the pound there only after forming a false breakout. I advise you to open long positions in GBP/USD immediately on a rebound in the 1.3745 area, or even lower - from 1.3703, counting on an upward correction of 15-20 points within the day.

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

The initial task of the bears is to protect the resistance at 1.3858. Only weak data on PMI for the UK services sector can harm the new upward trend, so it is better not to rush to sell from the level of 1.3858. The optimal scenario for opening short positions is to form a false breakout at this level, which will weaken the pound's position and push the pair to the first intermediate support at 1.3818, just below which passing the moving averages, playing on the side of the bulls. A breakthrough and test of this area from the bottom up creates another entry point into short positions, which will push GBP/USD even lower - to 1.3782, and there it is close to the 1.3745 low, where I recommend taking profits. However, one can count on such a large drop only in case we receive a very good report on the US labor market, which should surpass economists' forecasts. If the bears are not active around 1.3858 in the first half of the day, I advise you to postpone selling until a new major resistance at 1.3893. I also recommend opening short positions from there only if a false breakout is formed. Selling GBP/USD immediately on a rebound is possible from a new high in the 1.3926 area, counting on a downward correction of 25-30 points within the day.

I recommend that you familiarize yourself with:

The Commitment of Traders (COT) reports for August 24 showed that long positions decreased and short ones sharply rose, which significantly affected the delta. However, all these changes do not take into account Federal Reserve Chairman Jerome Powell's speech from last Friday, who with his statements had dashed any hope that the US dollar would further strengthen this fall. Obviously, the positions of the bulls have changed a lot and I do not recommend giving serious attention to the current COT report. Considering that for the entirety of last week we have not seen any important fundamental statistics on the UK, it is obvious that the bulls will grab any opportunity to build up long positions, counting on good summer reports and a new round of strengthening of the British pound in the medium term. However, the fact that representatives of the Bank of England are in no hurry to talk about changes in monetary policy affects the activity of traders. I advise you to continue with the strategy of buying the British pound in case we observe any good decline. The lower the pound falls, the more active buyers of risky assets will begin to show themselves, betting on real changes in the monetary policy of the BoE in the future. The COT report showed that long non-commercial positions fell from 41,898 to 39,489, while short non-commercial positions jumped from 37,247 to 56,234, indicating an advantage towards the bears, but in fact this is not true right now. As a result, the non-commercial net position decreased and reached -16,746, against 4,651 weeks earlier. Last week's closing price dropped to 1.3723 against 1.3840.

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates the resumption of the upward trend in the pair.

Moving averages

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 breakthrough of the lower border of the indicator in the area of 1.3795 will lead to a new wave of decline in the pound. Surpassing the upper border of the indicator in the area of 1.3858 will lead to a new wave of growth of the pound.

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.
• Short non-commercial 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.