04.09.202010:23 Forex Analysis & Reviews: GBP/USD: plan for the European session on September 4. Head and shoulders reversal pattern played-out. COT reports. Bears need a breakout of 1.3243

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

Yesterday was a great day for traders of the British pound, since both buyers and sellers made good money. I recommended opening short positions in the afternoon after consolidating below the support level of 1.3315, the test of which you can see on the reverse side on the 5-minute chart. After that, the head-and-shoulders reversal pattern was played out. The downward movement was around 70 points. Then, during the US session, the bears' inability to break through the area below 1.3243 and the repeated test of this level following the release of a weak US ISM non-manufacturing report formed a good entry point into long positions, which brought about another 50 points of profit. As for today, buyers of the pound still need to protect the support of 1.3243, but it will not be so easy to do this. If the pair falls to this range again, it is best to open long positions from there only when a false breakout forms there, but I recommend buying GBP/USD immediately for a rebound from the low of 1.3165, based on a correction of 30-40 points within the day.

An equally important task for the bulls is to break through and consolidate above the resistance of 1.3315, which is where the moving averages also pass. This will strengthen the demand for the pound and lead to a larger upward correction to the resistance area of 1.3378, which is where I recommend taking profits. Let me remind you that the Commitment of Traders (COT) reports for August 25 showed a reduction in both long and short positions. This suggests that there are players who are leaving the market since they want to lock in profits at current highs because they anticipate very strong market fluctuations in the future. The COT report indicates that short non-commercial positions decreased from 47,806 to 39,790 during the week. Long non-commercial positions significantly declined from 54,310 to 45,390. As a result, the non-commercial net position also fell, but still remained in positive territory at 5,600 versus 6,504 a week earlier.

To open short positions on GBP/USD you need:

Bears need to break through the area below support at 1.3243, which they failed to do yesterday afternoon. Most likely, if the pair drops to this level again, a breakout of this range will take place, but what is more important here is whether the bears will be able to gain a foothold below it. Testing it from the bottom up produces a signal to open short positions in the pound while expecting the British currency to fall to a low of 1.3165, which is where I recommend taking profits. Support at 1.3115 will be the long-term target, but it can only be achieved if the US Nonfarm Payrolls report comes out positive. An equally important task for the sellers is to protect resistance at 1.3315, which is where the pound sharply fell yesterday. You can open short positions from this range only if a false breakout forms there. I recommend selling GBP/USD immediately on a rebound after testing the high of 1.3378, counting on a correction of 20-30 points within the day.

Indicator signals:

Moving averages

Trading is carried out just below the 30 and 50 moving averages, which indicates pressure on the British pound.

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 lower border of the indicator in the 1.3255 area will lead to selling the pound. A breakout of the upper border of the indicator in the 1.3290 area may result in a new wave of growth in the pair.

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). Fast EMA period 12. Slow EMA period to 26. The 9 period SMA.
• Bollinger Bands (Bollinger Bands). The 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 the short and long positions of non-commercial traders.