For entering long positions on GBP/USD:

Earlier today, I was talking about the importance of the 1.4108 for the bull market. Let us look at the M5 chart and analyze the entry point. Bears again tried to go below this level in the first half of the day, though unsuccessfully. As a result, a buy signal occurred, indicating the extension of the bull trend. Positive Q1 GDP and industrial production data in the United Kingdom boosted the pound. Both readings came better than market expectations. Thus, the pair climbed by approximately 40 pips from 1.4108 earlier today but failed to reach the 1.4160 target.

The market is bullish. The pair is extending gains. The focus is on US inflation data. Weaker statistics may boost the pound, allowing bulls to break the 1.4160 resistance level. However, before that, the primary task is to protect the support level of 1.4108. A false breakout will give a buy signal and the bull trend that started last week will extend. If bulls break the 1.4160 mark, a test of this level from bottom to top will give one more buy signal. In such a case, the price may reach new highs in the area of 1.4201 and 1.4241, where I suggest taking profits. If bulls are less active near the 1.4108 resistance level and positive data comes out, long positions may be considered immediately on a rebound from the 1.4062 support level or from 1.4016, allowing a 25-30 pips correction intraday.

For entering short positions on GBP/USD:

Bears have once again tested the 1.4108 support level but have failed to break through the barrier. Most likely, strong US inflation data will lead to a breakout at 1.4108. If so, the pound is likely to plunge to 1.4062 and even to 1.4016, where I suggest taking profits. Alternatively, if the pair soars during the North American session, short positions may be opened after a false breakout near the 1.4160 resistance level. Otherwise, short positions can be considered after the price has reached another high near 1.4201, allowing a 25-30 pips correction intraday. The next strong resistance level is seen near the high of 1.4241.

The Commitment of Traders report (COT) as of May 4th logged a decrease in the number of long and short positions. However, this data did not reflect the changes in the market when the pound rose sharply on Friday. Last week, traders were increasing the number of short positions ahead of the BoE's monetary policy decision. The regulator chose to keep monetary policy unchanged, thus limiting the pound's bull run. At the same time, comments about tapering of the quantitative easing programme breathed new life into bulls. The disappointing US jobs report will continue to put pressure on the US dollar in the long term. That is why the bull trend of the pair is likely. Buyers are increasing the number of their positions amid growing optimism about the lifting of all quarantine restrictions in the UK this summer. According to the report, long non-commercial positions fell to 52,262 from 59,917. At the same time, short non-commercial positions rose to 32,414 from 30,699. As a result, the total non-commercial net position decreased to 19,848 from 29,218 a week earlier. The pair closed at 1.39033 against 1.38947 at the end of last week.

Indicator signals:

Moving averages

Trading is carried out near MA(30) and MA(50), which indicates a sideways trend in the market.

Note: Periods and prices of moving averages are viewed by the author of the article on the hourly chart and differ from the general definition of the classic daily moving averages on the D1 chart.

Bollinger Bands

A breakout of the upper border of the indicator near 1.4093 will boost the pound. A breakout of the lower border near 1.4108 will increase pressure on the pound.

Indicator description

• Moving average determines the current trend by smoothing volatility and noise. Period 50. Marked in yellow on the chart.
• Moving average determines the current trend by smoothing volatility and noise. Period 30. Marked in 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
• Nonprofit traders are speculators 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.
• Non-commercial short positions represent the total short open position of non-commercial traders.
• The total non-commercial net position is the difference between short and long positions of non-commercial traders.