To open long positions on GBP/USD, you need:
In my morning forecast, I paid attention to the level of 1.3270 and recommended making decisions on entering the market. Let's take a look at the 5-minute chart and figure out the entry point. The decline in activity in the service sector and small changes in the UK manufacturing sector did not prevent buyers of the British pound from breaking above the 1.3270 level. However, to my regret, I did not wait for the reverse test of this area from top to bottom, as I noted on the chart, to enter long positions. For this reason, I was forced to skip the signal. The technical picture for the second half of the day has partially changed. A lot will depend on the results of the Bank of England meeting. And what were the entry points for the euro in the morning?
If the central bank's politicians, together with its governor Andrew Bailey, surprise the markets, and this will only be done by statements that they plan to raise interest rates in the near future to combat inflation, this will give confidence to buyers of the pound. If nothing of the kind is announced, and the manager's rhetoric is more dovish– we will have to forget about the growth of the pound in the short term. A reduction in the number of initial applications for unemployment benefits and an increase in industrial production will all increase pressure on the pound. Only weak macroeconomic indicators will help the bulls to form a false breakdown and a new entry point into the market in long positions from the level of 1.3271. A more optimal scenario would be purchases after the fall of the pair and the formation of a false breakdown in the area of 1.3243, where the moving averages are playing on the buyers' side. This will lead to a signal to open long positions with the expectation of continuing the morning trend. If there is no activity at 1.3243, I advise you to postpone purchases to local lows: 1.3209 and 1.3173, where you can open long positions immediately for a rebound based on at least 15-20 correction points within a day. If the bulls manage to defend 1.3271, an equally important task will be to rise above the level of 1.3300, which we stumbled over today in the first half of the day. A breakthrough and a reverse test of 1.3300 after the results of the Bank of England meeting and a top-down test of this level - all this will lead to the formation of an additional buy signal to restore GBP/USD to the resistance area of 1.3340. A similar breakthrough of this level will open a direct road to the highs: 1.3368 and 1.3407, where I recommend fixing the profits.
To open short positions on GBP/USD, you need:
Sellers of the British pound did not rush to protect the morning highs and released the market to the area of a new resistance of 1.3300. We didn't reach the level of 1.3307 quite a bit, so we didn't get a good entry point into short positions there. Now the bears' focus is on protecting 1.3300 and returning 1.3271 to control. Only the formation of a false breakdown at 1.3300, together with strong data on the US economy, will give a good entry point into short positions with a decline in the area of 1.3271. A breakout and a reverse test from the bottom up of this level together during the publication of the Bank of England's decision form an additional entry point into short positions with the prospect of a decline already to the area of lows: 1.3243 and 1.3209, where I recommend fixing the profits. A breakdown of 1.3209 will return the bearish potential to the market with the prospect of a breakdown of 1.3173. If the pair grows during the American session and weak activity at 1.3300, it is best to postpone sales to 1.3340. I also advise you to open short positions there only in case of a false breakdown. It is possible to sell GBP/USD immediately for a rebound only from a large resistance of 1.3368, or even higher - from a maximum of 1.3407, counting on the pair's rebound down by 20-25 points inside the day.
In the COT reports (Commitment of Traders) for December 7, a reduction in both short and long positions was recorded. Given the almost equal reduction of positions, this did not lead to serious changes in the negative delta. Poor data on the UK economy, which came out at the end of last week, clearly soured the mood of buyers of risky assets, counting on an upward correction of the pair before the meeting of the Bank of England. This week, the governor of the central bank, Andrew Bailey, will talk about his position on further monetary policy. If it continues to be dovish, most likely the pressure on the pound will only grow, as representatives of the Federal Reserve System, on the contrary, are going to curtail stimulus measures, which should support the US dollar. High inflation remains the main reason why the Bank of England may change its mind about maintaining stimulus measures, but uncertainty will remain until the publication of the results of the meeting on December 16. An equally serious problem for the UK is a new strain of the omicron coronavirus, which can lead to another lockdown and the closure of the country for 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. The COT report for December 7 indicated that long non-commercial positions fell from the level of 52,099 to the level of 48,950, while short non-commercial positions fell from the level of 90,998 to the level of 87,227. This led to the preservation of the negative non-commercial net position almost unchanged: -38,277 versus -38,899 a week earlier. The weekly closing price sank slightly from 1.3314 to 1.3262.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 daily moving averages, which indicates an attempt by bulls to return to the market.
Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger Bands
A breakthrough of the upper limit of the indicator in the area of 1.3300 will lead to an increase in the pound. In case of a decline, the lower border of the indicator in the area of 1.3209 will provide support.
Description of indicators
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit 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 the short and long positions of non-commercial traders.
