Last Friday, there was only one market entry signal. Let's take a look at the 5-minute chart and figure out what happened. In my morning forecast, I drew attention to the level of 1.2433 and recommended making market entry decisions from it. The GBP/USD pair declined and formed a false breakout at 1.2433, creating a buy signal. As you can see on the chart, the signal was ignored since traders had no desire to buy the British pound before the US data release. After the report, the pound plummeted, but it was a few pips short of testing 1.2385, so a buy signal was not formed.
Long positions on GBP/USD:
There is no UK data in the first half of today, which, as we have already seen, makes it very difficult for pound buyers. Therefore, the focus will be on the movement of the pair near 1.2385, where it is currently heading. A decline and formation of a false breakout there would confirm the presence of those willing to buy the pound in the market, providing a good signal to open long positions with a return to 1.2433, where the moving averages, which play on the side of sellers, pass. A breakthrough and a top/bottom test of this level will form another entry point into long positions with the prospect of returning to the high of 1.2478, where traders may book profits. The next target will be the area of 1.2519. In the scenario of a decline to the 1.2385 area and a lack of activity from bulls, it is better not to rush with purchases. In this case, it is better to open long positions only on a false breakout around the next support level of 1.2335. I plan to buy the British pound on a rebound from the low of 1.2275, allowing an intraday correction of 30-35 pips.
Short positions on GBP/USD:
Sellers need to protect the level of 1.2433. Only a false breakout there will provide a chance for a continuation of the downward correction, reaching 1.2385. A breakthrough and a downward test of this level may increase pressure on the pound, forming a sell signal with a decline to 1.2335. This will be the moment when we can talk about a new downtrend. The target remains at the low of 1.2275, which the price is unlikely to reach today without statistics and news. If the GBP/USD pair grows and we see a lack of activity at 1.2433, which is also quite probable, it is better to postpone sales until the high of 1.2478. Only a false breakout there will provide an entry point into short positions. If there is no downward movement there, I will sell the British pound on a rebound from the high of 1.2519, allowing an intraday correction of 30-35 pips.
The COT report for March 28 shows that there was a reduction in long positions and an increase in short positions. In fact, there were no significant changes in the balance of power. The released data on the upward revision of UK GDP growth for the fourth quarter was enough for the British pound to hold on to its monthly highs and return to them at the beginning of this month. Statements made by Bank of England Governor Andrew Bailey were also sufficient to expect further interest rate hikes, which played in favor of buyers. The latest COT report states that short non-commercial positions increased by 3,289 to 52,439, while long non-commercial positions decreased by 297 to 28,355, leading to an increase in the negative delta of the non-commercial net position to -24,084 compared to -20,498 a week earlier. The weekly closing price increased to 1.2358 against 1.2241.
Signals of indicators:
Indicator signals:
Moving Averages
The pair is trading below the 30 and 50-day moving averages, indicating a further decline in the pair.
Note: The moving average period and prices are considered by the author on the H1 hourly chart and differ from the general definition of classical daily moving averages on the D1 daily chart.
Bollinger Bands
If the pair declines, the lower boundary of the indicator around 1.2400 will provide support.
Descriptions of indicators
- Moving average (smooths volatility and noise, defining the current trend). Period 50. Marked in yellow on the chart.
- Moving average (smooths volatility and noise, defining the current trend). Period 30. Marked in green on the chart.
- MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages) Fast EMA 12. Slow EMA 26. SMA 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting 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.
