To open long positions on GBP/USD, you need:
Weak data on the US economy did not allow buyers of the dollar to continue strengthening the pair last Friday, and after the bears gave way to resistance at 1.4059, the situation changed dramatically. Let's take a look at the 5 minute chart and break down the trades that were formed. A breakthrough and consolidation above the resistance of 1.4059 led to a reverse test of this level from top to bottom, but the bulls failed to hold it the first time. After a slight decline and a return to the level of 1.4059, an entry point to long positions was still formed - I marked it on the chart. After some time, the pound grew by 50 points to the resistance area of 1.4108. It was from this range that I advised you to sell the pair immediately on a rebound, calculated by 20-25 points within the day, which happened. In general, last Friday it was possible to take about 70 points of profit from the market.
The bulls have taken control of the market and all that remains is to rise above resistance at 1.4108, which they failed to do last Friday. A breakthrough and test of this level from top to bottom will lead to opening new long positions in continuation of the upward trend and with the nearest goal being an exit to the high of 1.4160, where I recommend taking profit. Being able to surpass this range will depend on this week's fundamentals. Today's speech by the representative of the Bank of England Andy Haldane is unlikely to somehow significantly affect the pound. In case it goes beyond 1.4160, the next big resistance will be seen at 1.4101. If the bulls are not active around 1.4108, the pressure on the pound could return. In this case, I do not recommend rushing into long positions: the optimal scenario would be to open longs when a false breakout is formed in the support area of 1.4055, slightly above which there are moving averages playing on the side of the pound bulls. You can open long positions immediately on a rebound from a larger low in the 1.4007 area, counting on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
If we see the pound rising in the first half of the day, then the best option for opening short positions will be the formation of a false breakout in the resistance area of 1.4108, above which it was not possible to break through last Friday. This scenario creates a convenient entry point, counting on a decline in GBP/USD to support 1.4055, where I recommend taking profits. If the bears manage to fall below this range, then only its reverse test from the bottom up can create a convenient entry point for short positions as we count on the pair's return to last week's low at 1.4007. If bears are not active around 1.4108, it is best to postpone short positions until the next high at 1.4160 is renewed, from where you can open short positions immediately on a rebound, counting on a downward correction of 20-25 points within the day. The next big resistance is seen around 1.4201.
The COT reports (Commitment of Traders) for May 4 showed that long positions decreased and short ones have increased. However, the report does not take into account Friday's market changes, when the British pound showed a large increase. Last week, we all followed the Bank of England's decision on interest rates, so traders feared for the pound's succeeding growth, building up short positions. Keeping monetary policy unchanged had limited the pound's growth potential, but hints from the committee members that it is time to think about curtailing stimulus programs breathed new strength into the bulls. A disappointing report on the US labor market will continue to weigh on the dollar for a long time at any opportunity. Therefore, the trend for strengthening the British pound will continue. The prospect of a recovery in the UK economy in the summer, when all quarantine restrictions will be lifted, also causes a lot of optimism and helps the bulls find excuses to build up their positions. The COT report indicated that long non-commercial positions declined from 59,917 to 52,262. At the same time, short non-commercial positions rose from 30,699 to 32,414, causing the non-commercial net position to decline to 19,848 versus 29,218 a week earlier. But the price rose to 1.39033 against 1.38947 at the end of the last week.
Indicator signals:
Trading is carried out above 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
Surpassing the upper border of the indicator in the area of 1.4108 will lead to a new wave of growth of the pound. Surpassing the lower border of the indicator in the area of 1.4055 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.
