In my morning forecast, I focused on the 1.2412 level and planned to make trading decisions based on it. Let's look at the 5-minute chart and analyze what happened. A rise and subsequent false breakout near 1.2325 provided a good entry point for selling the pound, resulting in a decline of more than 40 points. The technical outlook was revised for the second half of the day.

For Opening Long Positions on GBP/USD:

Strong PMI data from the UK led traders to reassess their positions, pushing the pound to a new weekly high and continuing its growth within a new bullish market. The second half of the day includes numerous statistics, starting with PMI indices from the U.S. and ending with consumer sentiment and inflation expectations from the University of Michigan, along with U.S. existing home sales data.

In case of a bearish reaction to this data, I plan to buy only after a false breakout near the nearest support at 1.2412, which is intermediate in nature. The target will be a recovery of GBP/USD to the resistance at 1.2476, where I expect sellers to make their first significant move. A breakout and retest of this range from above to below will provide a new entry point for long positions, aiming to update 1.2510, further strengthening the bullish trend. The ultimate target will be the level around 1.2543, where I will fix profits.

If GBP/USD declines and bulls show no activity at 1.2412, the pound could reverse all its morning gains. In this case, only a false breakout near the 1.2375 low will provide suitable conditions for opening long positions. I plan to buy GBP/USD immediately on a rebound from 1.2336, targeting an intraday correction of 30-35 points.

For Opening Short Positions on GBP/USD:

Sellers made themselves known in the first half of the day, but strong data wiped out all attempts to reverse the market. In the event of further GBP/USD growth, it is important not to miss the nearest resistance at 1.2476, which may be tested soon. A false breakout there, following U.S. data, will provide an entry point for short positions targeting the 1.2412 level. A breakout and retest of this range from below to above will trigger stop orders, paving the way toward 1.2375. The ultimate target will be the level around 1.2336, where I will fix profits.

If demand for the pound persists in the second half of the day and bears fail to act around 1.2476, it would be better to postpone short positions until testing the resistance at 1.2510. I will sell there only after a failed consolidation. If no downward movement occurs even there, I will look for short positions on a rebound from 1.2543, but only for a correction of 30-35 points within the day.

Commitment of Traders (COT) Report:

The COT report for January 14 showed a sharp increase in short positions and a reduction in long ones. The balance of power has shifted significantly. It is clear that the market is now at a turning point, with an almost equal number of buyers and sellers, which does not favor the former. In the near term, labor market data will be released, and following weak UK GDP growth and high inflation figures, the Bank of England's future decisions seem less certain. Whether the regulator will cut interest rates given the current challenges remains an open question.

The latest COT report indicated that long non-commercial positions decreased by 786, to a level of 80,557, while short non-commercial positions increased by 13,282, to a level of 80,119. As a result, the gap between long and short positions widened by 413.

Indicator Signals

Moving Averages

The pair is trading above the 30- and 50-day moving averages, indicating a continued rise in the pound.

Note: The author considers moving averages on the hourly H1 chart, which differ from the classic daily moving averages on the D1 chart.

Bollinger Bands

If the pair declines, the lower boundary of the indicator near 1.2330 will act as support.

Indicator Descriptions:

• Moving Average (MA): Identifies the current trend by smoothing volatility and noise. Period: 50 (yellow on the chart); Period: 30 (green on the chart).
• MACD Indicator (Moving Average Convergence/Divergence): Fast EMA – period 12; Slow EMA – period 26; SMA – period 9.
• Bollinger Bands: Period: 20.
• Non-commercial traders: Speculators like individual traders, hedge funds, and large institutions using the futures market for speculative purposes.
• Long Non-commercial Positions: Total long open positions of non-commercial traders.
• Short Non-commercial Positions: Total short open positions of non-commercial traders.
• Total Non-commercial Net Position: The difference between short and long positions of non-commercial traders.