To open long positions on GBP/USD, you need:
Several excellent signals to enter the market were formed. Let's take a look at the 5 minute chart and understand the entry points. Bulls of the British pound were quite active in the morning trading, having achieved a breakdown of the resistance at 1.3247, which I paid special attention to in my forecast. It can be clearly seen how the bulls are trying to break through 1.3247, after which the pair quickly returns to this range, which allows us to make sure that there are big players in the market. However, to my regret, literally a couple of points were missing before 1.3247 was tested from top to bottom. Those who were waiting for the renewal of this range, and I was among them, did not manage to enter the market in long positions, alas. In the second half of the day, quite a bit was not enough before the formation of a false breakout in the resistance area of 1.3291, so I did not wait for a signal to enter the market there. Only a breakthrough and a reverse test of 1.3249 from the bottom up gave an entry point to sell the pound in the afternoon, but after a 20-point drop, the pressure on the pair eased.
Before examining the technical picture of the pound, let's take a look at what happened in the futures market. The Commitment of Traders (COT) reports for November 30 revealed that both short positions and long positions increased. However, there were more of the latter, which led to an increase in the negative delta. Last week there was very little fundamental statistics on the UK economy, and all the speeches of Bank of England Governor Andrew Bailey were dovish, which did not give traders confidence in the future of the British pound. And if the representatives of the BoE preferred to take a more wait-and-see attitude, then the speeches of Federal Reserve Chairman Jerome Powell, on the contrary, were of a hawkish character. In his comments, he spoke quite a lot about the expected changes in monetary policy towards tightening. The reason for this is rather high inflation, which has grown from "temporary" to permanent, which creates many problems for the central bank. An equally serious problem for the UK is the new Omicron coronavirus strain, which could lead to another lockdown and the country's quarantine. So far, the authorities have to closely monitor the development of the situation with the new strain, which negatively affects the economy at the end of this year. Let me remind you that the Fed will hold a meeting next week, at which a decision on the bond purchase program will be made, so demand for the US dollar is expected to remain in the shorter term. The COT report indicated that long non-commercial positions rose from 50,122 to 52,099, while short non-commercials increased from 84,701 to 90,998. This led to an increase in the negative non-commercial net position: delta was -38,899 against -34,579 a week earlier. The weekly closing price dropped from 1.3397 to 1.3314.
Today we have absolutely nothing according to the fundamental statistics of the UK, so the bulls can again make several attempts to break and consolidate above 1.3283. An important task in the first half of the day will be to regain control over the resistance at 1.3283, above which we did not manage to get out yesterday, which led to a rapid fall of the pound in the second half of the day. A breakthrough and test of this area from top to bottom forms a new entry point for buying the pound with the prospect of stopping the bearish trend and a GBP/USD recovery to the 1.3329 area. A breakthrough of this range will open a direct opportunity to renew the high at 1.3368, and the next target will be the area of 1.3407, where I recommend taking profits. In case the pound falls during the European session, an important task is to protect the support at 1.3234, which was formed at the end of yesterday. Only the formation of a false breakout there will lead to a buy signal. I advise you to open long positions in GBP/USD immediately for a rebound only from a low like 1.3196, or even lower - around 1.3139, counting on a correction of 20-25 points within the day.
To open short positions on GBP/USD, you need:
So far, the bears of the British pound are not very active in the 1.3283 area, and most likely there is very little time left for the bulls to break through this range. It is another matter whether the bulls will be able to continue the confident growth of the pound, or after the breakthrough of 1.3283 and a small upward movement, the initiative will quickly fade away again. The optimal scenario for the bears is the formation of a false breakout at this level, which will lead to creating the first entry point into short positions with the prospect of a decline to the 1.3234 area, slightly above which the moving averages are located, already playing on the side of the bulls. Taking back control of this level will create real problems for the bulls and will return the downward trend. A reverse test of 1.3234 from the bottom up will give an excellent entry point into short positions, which will push GBP/USD to the lows of 1.3196 and 1.3139, where I recommend taking profits. In case the pair grows during the European session and the bears are not active at 1.3283, it is best to postpone selling until the larger resistance of 1.3329. I also recommend opening short positions there only in case of a false breakout. Selling GBP/USD immediately on a rebound is possible only from a large resistance at 1.3368, or even higher - from a new high in the 1.3407 area, counting on the pair's rebound down by 20-25 points within the day.
Indicator signals:
Trading is carried out just above the 30 and 50 moving averages, which indicates an attempt by the bulls to seize the initiative.
Moving averages
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 breakthrough of the upper border of the indicator in the area of 1.3283 will lead to a new wave of growth of the pound. A breakout of the lower border of the indicator in the area of 1.3234 will increase the pressure on 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) 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.
