To open long positions on GBP/USD, you need:
Yesterday, several interesting signals were formed to enter the market. Let's take a look at the 5-minute chart and figure out what happened. In my morning forecast, I paid attention to the 1.3730 level and recommended making decisions on entering the market from it. Forming a false breakout at this level in the first half of the day led to a good signal to sell the pound. However, I did not wait for the pair to fall and move against the trend. A breakthrough and consolidation with a reverse test of 1.3730 in the middle of the European session resulted in forming a buy signal for GBP/USD. As a result, the pair passed more than 20 points and that was the end of it. The technical picture for the afternoon was revised. The nearest support was in the area of 1.3716, from which the formation of two signals for long positions on the pound occurred, which brought more than 30 points of profit.
The upward trend continues and the bulls are not going to retreat yet. Their main goal for today is to break through the resistance of 1.3753, but this will happen subject to strong fundamental statistics, which is planned today for the UK economy. The bulls' primary task for today is to protect the support of 1.3706, which was formed following yesterday's results. There are moving averages at this level that play on the bulls' side, which should also help the bulls to cope with the pressure. Forming a false breakout at 1.3706 and good data on UK GDP and industrial production form a buy signal with the prospect of continuing the bull market aimed at updating the resistance at 1.3753, as the pair could not rise above it yesterday. A breakthrough and a test of this level from top to bottom will provide another entry point and strengthen the bulls' position in order to continue the growth of GBP/USD to the highs: 1.3790 and 1.3842. The 1.3864 level is a more distant goal, where I recommend taking profits. However, be careful with buying at the highs, as a fairly large bearish divergence has formed on the MACD indicator, which can lead to a slowdown in the bullish trend. In case GBP/USD falls during the European session and a lack of activity at 1.3706, it is best to postpone long positions to the level of 1.3664, from where it will be possible to observe more aggressive actions from the bulls. To miss this area is tantamount to missing the initiative. Forming a false breakout at 1.3664 will give an entry point in hopes of further recovery of GBP/USD. You can buy the pound immediately on a rebound from 1.3620, or even lower - from a low like 1.3566, counting on a correction of 20-25 points within the day.
To open short positions on GBP/USD, you need:
Bears can't offer anything serious yet to influence the bullish trend. The only calculation is based on today's data on the UK economy, which should fully indicate a slowdown in economic activity by the end of the year – but this is unlikely. The bears' main task for today is to protect the resistance of 1.3753, and the emerging divergence on the MACD indicator should provide help. The pair's exit above this range will create a number of problems and lead to the continuation of the bullish trend. Forming a false breakout at the 1.3753 level and the preservation of divergence can create the first entry point into short positions against an upward trend, followed by a decline to the area of 1.3706, for which you will have to fight hard for. If there are no quick shorts after the 1.3753 test, I advise you not to enter into short positions. There are moving averages playing on the bulls' side at the level of 1.3706, so a breakthrough and a reverse test of this range from the bottom up will increase pressure on the pound and dump it to the next support of 1.3664. Taking control of this level will give a new entry point into short positions with the prospect of a decline in GBP/USD by 1.3620 and 1.3566, where I recommend taking profits. If the pair grows during the European session and the bears are weak at 1.3753, it is best to postpone short positions until the next major resistance at 1.3790. I also advise you to open short positions there only in case of a false breakout. It is possible to sell GBP/USD immediately for a rebound from a large resistance of 1.3842, or even higher - from a new high in the area of 1.3864, counting on the pair's rebound down by 20-25 points within the day.
I recommend for review:
The Commitment of Traders (COT) report for January 4 revealed a sharp increase in long positions and a reduction in short positions - which indicates an increase in the pound's appeal after the Bank of England raised interest rates at the end of last year. If you look at the overall picture, the prospects for the British pound look pretty good. The BoE's decisions continue to support buyers of risky assets in the expectation that the central bank will continue to raise interest rates this year, which will make the pound even more attractive. High inflation remains the main reason why the BoE will continue to tighten monetary policy. On the other hand, the US dollar also has support: inflation data in the US are expected this week, which, together with the recent report on the US labor market, will certainly force the Federal Reserve to act more aggressively. The first interest rate hikes are planned in the spring, which will make the US dollar more attractive. The COT report for January 4 indicated that long non-commercial positions rose 20,824 to the level of 25,980, while short non-commercial positions fell from the level of 78,510 to the level of 65,151. This led to a serious change in the negative non-commercial net position from -57,686 to -39,171. The weekly closing price rose from 1.3209 to 1.3482.
Indicator signals:
Trading is conducted above 30 and 50 moving averages, which indicates further growth of the pound.
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
In case of a decrease, the lower border of the indicator around 1.3700 will act as support. In case of growth, the upper border of the indicator in the area of 1.3753 will act as resistance.
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.
