To open long positions on GBP/USD, you need:
Several signals to enter the market were formed yesterday. Let's look at the 5-minute chart and analyze the deals: you can see how, after the pound sharply rose in the first half of the day amid low trading volume, the bears tried to protect resistance at 1.3863, and it seems like this can be done, which leads to creating a signal to open short positions... Unfortunately, this entry point was not realized, and after a short pause, the bulls surpassed 1.3863 and settled above this range. It was not possible to wait for a normal signal to buy the pound, since the trade was carried out with a constant crossing of this range, up and down. The excellent data on the American economy did not indicate that the pound would continue to rapidly grow. We can only get another signal to open short positions immediately for a rebound from resistance at 1.3914 in the afternoon, which I mentioned in yesterday's review. The downward movement was around 20 points.
Before examining the technical picture of the pound, let's take a look at what happened in the futures market. There is quite a lot of turmoil there and all indicators show a decline. This is not surprising, given the active struggle that bulls have fought in the past week to prevent the bear market from continuing to form in the short term. The Commitment of Traders (COT) for March 30 recorded a reduction in both long and short positions, while the total non-commercial net position increased. Bulls have been active in the past week with every approach to major support levels, which has led to such a mess in the market. The latest report on the UK economy made it possible to build a new upward correction for the pound, albeit so far only in the short term. Confidence continues to grow among investors and economists that the UK economic recovery is gaining quite good momentum, which will support the British pound this summer, as disagreements grow at the Bank of England over how the economy will develop further and when to respond to all this. Those who expect to buy the pound should take a closer look at the market.
So: long non-commercial positions fell from 51,843 to 47,222. At the same time, short non-commercial positions fell from 30,024 to 22,263, which indicates a serious revision of forces in the market in the near future. As a result, the non-commercial net position rose to 29,959 from 21,819 a week earlier. The weekly closing price dropped to 1.3774 from 1.3859.
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Most likely the bulls will focus on surpassing resistance at 1.3914 in the first half of the day, beyond which it was not possible to get out of yesterday. A breakthrough and being able to settle above this level with a test from the bottom up will only strengthen the pound's position, which will lead to continuing the upward correction for the pair so it can reach a high like 1.3953, where I recommend taking profits. The next larger resistance area is seen around 1.3999. In case GBP/USD falls in the first half of the day, bulls need to protect support at 1.3863, where the moving averages pass, playing on the side of the bulls. A false breakout there creates an excellent signal to enter long positions as the GBP/USD continues to rise to the resistance of 1.3914. If bulls are not active in the support area of 1.3863, then it is best not to rush into long positions: the best option would be to open long positions immediately on a rebound from the 1.3814 low, counting on an upward correction of 25-30 points within the day. The next major support is seen at 1.3760.
To open short positions on GBP/USD, you need:
The bears' initial goal is to regain control of support at 1.3863, which they lost yesterday afternoon. Considering that bulls have the upper hand, only a breakthrough and being able to settle below this range with a test from the bottom up can create a good signal to open short positions in hopes of returning to a low like 1.3814, where I recommend taking profits. The next target will be the 1.3760 level. However, before counting on such a large drop in the pound, the bears will need to cope with the moving averages passing just above the support at 1.3863. In the event of a further upward correction in GBP/USD in the first half of the day, then it is best not to rush to sell: you need to wait for a false breakout to form in the area of the 1.3914 high and only after that should you open short positions in order to resume the bear market. If bears are not active in this range, the best option would be to open short positions immediately on a rebound from the high of 1.3953, counting on a downward correction of 25-30 points within the day. The next major resistance is seen around 1.3999.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates an attempt by the bulls to return to the market and continue the upward correction for the pair.
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
Growth will be limited by the upper level of the indicator around 1.3925. Surpassing the lower border of the indicator in the area of 1.3863 will increase the pressure on the pound.
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.
