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GBP/USD: plan for the European session on January 12. COT reports. The bull market for the pound continues. Aim for resistance

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Relevance up to 05:00 2022-01-13 UTC+00

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

Several good signals to enter the market were formed yesterday. Let’s take a look at the 5-minute chart and figure out what happened. In my morning forecast, I paid attention to the 1.3602 level and advised you to make decisions on entering the market. The bulls’ attempt to settle at new highs was crowned with success. After the decline and the test of this level from top to bottom, a signal to buy the pound was formed. However, this did not lead to further growth, and after falling below this level, a sell signal was formed in the afternoon. A reverse test of this level from the bottom up, the high probability of which I drew attention to in my forecast, gave an excellent entry point to short positions, which subsequently led to a 35 points drop in GBP/USD. In the middle of the US session, a false breakout at the level of 1.3566 formed an excellent entry point into long positions in continuation of the bull market, which led to a 60 points rise in the pair.

The bulls’ primary task for today is to protect the support of 1.3613, which was formed following yesterday’s results. There are moving averages playing on the bulls’ side at this level, which should also help the pound bulls to cope with the pressure. The formation of a false breakout at 1.3613 creates a buy signal with the prospect of continuing the bull market aimed at updating the new resistance of 1.3664. A breakthrough and test of this level from top to bottom will give an additional entry point and strengthen the bulls’ position in order to continue the growth of GBP/USD to the highs: 1.3710 and 1.3754. The 1.3793 level is a more distant target, where I recommend taking profits. However, this level will only be available with very weak inflation in the US in December this year. In case the pound falls during the European session and a lack of activity at 1.3613, it is best to postpone long positions to the level of 1.3566, from where it was possible to observe more aggressive actions of bulls yesterday. To miss this area is tantamount to missing the initiative. Forming a false breakout at 1.3566 there will give an entry point in the expectation of further recovery of GBP/USD. You can buy the pound immediately on a rebound from 1.3532, or even lower – from a low like 1.3493, counting on a correction of 20-25 points within the day.

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

Bears can’t offer anything serious yet to influence the bullish trend. It is possible that today’s inflation in the United States will change the situation, but this is unlikely. The primary task for today is to protect the resistance of 1.3664, as the pair’s exit above this range will create a number of technical problems and lead to continuing the bullish trend. No important fundamental statistics on the UK today, while a Bank of England representative will speak in the afternoon. Forming a false breakout at the level of 1.3664 creates the first entry point into short positions, followed by a decline to the area of 1.3613, for which you will have to fight hard, since there are also moving averages playing on the bulls’ side. Crossing 1.3613 and a reverse test from the bottom up will increase pressure on the pound and dump it to the next support of 1.3566. A consolidation and the reverse test of 1.3566 from the bottom up will give a new entry point into short positions with the prospect of a decline in GBP/USD by 1.3532 and 1.3496, where I recommend taking profits. If the pair grows during the European session and bears are weak at 1.3664, it is best to postpone short positions to a larger resistance of 1.3710. I also advise you to open short positions there only in case of a false breakout. It is possible to sell GBP/USD immediately for a rebound from a large resistance of 1.3754, or even higher – from a new high in the area of 1.3793, counting on the pair’s rebound down by 20-25 points within the day.

I recommend for review:

The Commitment of Traders (COT) report for January 4 revealed a sharp increase in long positions and a reduction in short positions – which indicates an increase in the pound’s appeal after the Bank of England raised interest rates at the end of last year. If you look at the overall picture, the prospects for the British pound look pretty good. The BoE’s decisions continue to support buyers of risky assets in the expectation that the central bank will continue to raise interest rates this year, which will make the pound even more attractive. High inflation remains the main reason why the BoE will continue to tighten monetary policy. On the other hand, the US dollar also has support: inflation data in the US are expected this week, which, together with the recent report on the US labor market, will certainly force the Federal Reserve to act more aggressively. The first interest rate hikes are planned in the spring, which will make the US dollar more attractive. The COT report for January 4 indicated that long non-commercial positions rose 20,824 to the level of 25,980, while short non-commercial positions fell from the level of 78,510 to the level of 65,151. This led to a serious change in the negative non-commercial net position from -57,686 to -39,171. The weekly closing price rose from 1.3209 to 1.3482.

Indicator signals:

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

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

In case of a decline, the lower border of the indicator at 1.3566 will act as a support. In case of growth, the upper border of the indicator in the area of 1.3665 will act as a resistance.

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.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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EUR/USD: plan for the European session on January 12. COT reports. Euro is one step away from going beyond the horizontal

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