09.02.202112:58 Forex Analysis & Reviews: GBP/USD: trading plan for American session on February 9 (overview of morning trade). GBP plunges below 1.3723 aiming to break 1.3688

What is needed to open long positions on GBP/USD

Speculators have got stuck amid low volatility of the pound sterling and uncertainty of a further trajectory amid the lack of large market players. Such a puzzle erased a trade volume. As a result, GBP/USD could not leave the borders of the trading range which I described in detail in the morning. The levels of 1.3757 – 1.3791 have not been tested yet. So, no market entry signals have been generated. In this context, GBP/USD was trading quietly in the first half of the day. The empty economic calendar during the American session could step up pressure on the sterling.

From the technical point, nothing has changed. The targets remain the same. The prior task of the buyers will be to break and fix the price above resistance of 1.3791. If tested downwards, this will create extra signals to open long positions bearing in mind a further uptrend that could lead to higher highs at near 1.3825 and 1.3879 where I recommend profit taking. In case of a downward correction in the second half of the trading day amid the lack of fundamental data, it would be better not to rush buying the pair but wait for a fake breakout at near support of 1.3757. Earlier, it acted as strong resistance which subdued the bullish momentum of GBP/USD.

If GBP bulls do not reveal robust activity there, I recommend waiting until a low of 1.3721 is tested and buy the pair from there, bearing in mind upward 20-30 pips correction intraday. Besides, moving averages are also passing there which are playing in the buyers favor.

What is needed to open short positions on GBP/USD

Only a fake breakout at about 1.3791 will revive selling pressure and create a minor downward correction in the second half of the trading day. Equally important task for the bears will be regaining control over support of 1.3757. However, there are no fundamental reasons for that. Therefore, only a test ad a breakout of this level upwards will enable a market entry point for short positions with the downward target of 1.3721 where I recommend profit taking. Moving averages are passing there which are benefitting the pound bears.

Meanwhile, the Democrats are making every effort to pump massive cash into the US economy. Such endeavors are taking the shine off the US dollar. So, the greenback is losing ground against the pound sterling. In case GBP/USD grows in the American session amid the lack of the bears' activity at near 1.3791, it would be a good idea to refrain from selling the pair but wait for a higher high than 1.3825. It would be better to open short positions at about resistance of 1.3870, reckoning a downward 30-35 pips correction intraday.

Let me remind you that the COT report (Commitment of Traders) from February 2 logged an increased both of long and short positions. This time, the buyers were more numerous that led to a larger positive delta. Desperate efforts of the bulls to climb over one-year highs will ensure their success sooner or later. So, the buyers don't lose hope for a further bullish trend in February this year. Every notable plunge of the sterling makes large market players add to long positions, reckoning a rapid recovery of GBP/USD in the future. Long non-commercial positions increased from 47,360 to 53,658. At the same time, short non-commercial positions rose from 39,395 to 44,042 that didn't allow the bears to hold the upper hand over the market. As a result, the non-commercial net positions grew to 9,616 from 7,965 a week ago. GBP/USD closed the last trading week at 1.3675 against 1.3676 a week earlier.

The fact that the bulls retained the price at such elevated volatility during the week proves that the currency pair aims to surpass one-year highs. I would recommend betting on further strength of GBP. Once the lockdown is softened that is expected in February this year, demand for GBP will get more buoyant. The UK government is due to announce another stimulus package in March to support the population and the labor market. This is also bullish for the sterling. Last week, the Bank of England made it clear that negative interest rates were postponed indefinitely. Thus, the British pound has all reasons to spread the wings.

Signals of technical indicators

Moving averages

The pair is trading at about 30- and 50-period moving averages. It indicates a further advance of GBP.

Remark. The author is analyzing a period and prices of moving averages on the 1-hour chart. So, it differs from the common definition of classic daily moving averages on the daily chart.

Bollinger Bands

In case GBP declines in the second half of the trading day, the indicator's lower border at 1.3721 will serve as support.

Definitions of technical indicators

• Moving average recognizes an ongoing trend through leveling out volatility and market noise. A 50-period moving average is plotted yellow on the chart.
• Moving average identifies an ongoing trend through leveling out volatility and market noise. A 30-period moving average is displayed as the green line.
• MACD indicator represents a relationship between two moving averages that is a ratio of Moving Average Convergence/Divergence. The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. A 9-day EMA of the MACD called the "signal line".
• Bollinger Bands is a momentum indicator. The upper and lower bands are typically 2 standard deviations +/- from a 20-day simple moving average.
• Non-commercial traders - speculators such as retail traders, hedge funds and large institutions who use the futures market for speculative purposes and meet certain requirements.
• Non-commercial long 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.
• The overall non-commercial net position balance is the difference between short and long positions of non-commercial traders.