To open long positions on GBP/USD, you need:
Yesterday, an excellent signal was formed to buy the pound. Let's take a look at the 5-minute chart and figure out what happened. In my forecast, I paid attention to the 1.3469 level and advised making decisions there. A breakthrough and a reverse test from the top down of this range created an excellent entry point into long positions, which led to the pound's growth in the area of the target level of 1.3519. This allowed us to take about 50 points of profit from the market. Good data on the index of manufacturing activity in the UK allowed this signal to be realized.
There are no important statistics on the UK today, so pound bulls may have real problems with further building an upward correction. You need to be very careful at the new high of 1.3536, on which a lot now depends. Before tomorrow's meeting of the Bank of England, there will clearly be fewer people willing to buy the pound at these levels.
An important task for the bulls today is to protect the support of 1.3495, where the moving averages are playing on their side. From this range, we can count on the continuation of the upward correction for the pair. It is important to form a false breakout at 1.3495. Only this creates the first entry point into long positions. An equally important task is a breakthrough and test of 1.3536 from top to bottom, which will provide another signal to buy the pound in order to return to 1.3574. Updating the 1.3612 area will be a more difficult task, but this will clearly happen only in case of aggressive changes in the central bank's policy after tomorrow's meeting. I recommend taking profits there.
In case GBP/USD falls during the European session and a lack of activity at 1.3495, it is better not to rush into buying risky assets. I advise you to wait for the test of the next major level of 1.3455. Forming a false breakout will provide an entry point to long positions. You can buy the pound immediately for a rebound from 1.3407, or even lower - from this month's low of 1.3360, counting on a correction of 20-25 points within the day.
To open short positions on GBP/USD, you need:
The bears remain on the sidelines and obviously will not be active until tomorrow's results of the Bank of England meeting. Much will depend on the degree of hawkish policy, so it is unlikely that anyone will be in a hurry to sell the pound even from current highs.
The primary task is to protect the 1.3536 level. The formation of a false breakout in this range, together with the divergence that is being formed now on the MACD indicator, all this creates the first entry point into short positions, counting on the resumption of the bear market and the pair's decline to the intermediate support area of 1.3495, formed by yesterday's results. A breakthrough and a test of 1.3495 from the bottom up will provide another entry point for a short position on the pound with the goal of reaching 1.3455 and 1.3407, where I recommend taking profits.
If the pair grows during the European session and bears are weak at 1.3536, and as we know, there are no important statistics today, it is best to postpone short positions until the next major resistance at 1.3574. 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 1.3612, or even higher - from the high in the area of 1.3656, 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 25 showed that short positions increased and a sharp reduction in long ones. All this has led to a return of the market to the bears' side, but this week the situation may change dramatically. As the bears did not try to continue the downward trend, it turned out quite badly. The bears were not helped by the Federal Reserve's statements after the monetary policy meeting that the central bank would start raising interest rates in the United States in March. Most likely, the demand for the pound will gradually recover, as a meeting of the Bank of England committee will be held this Thursday, at which it will be decided to raise interest rates. However, the pressure on the pound will remain due to the observed fundamental picture, which creates a number of more serious moments limiting the upward potential. However, if you look at the overall picture, the prospects for the British pound look pretty good, and the observed downward correction makes it more attractive. In any case, the BoE's decision to raise interest rates further this year will push the pound to new highs. The COT report for January 25 indicated that long non-commercial positions decreased from the level of 39,760 to the level of 36,666, while short non-commercial positions increased from the level of 40,007 to the level of 44,429. This led to a drop in the negative non-commercial net position from -247 to -7,763. The weekly closing price dropped from the level of 1.3647 to the level of 1.3488.
Indicator signals:
Trading is above 30 and 50 moving averages, which indicates a continuation of the growth of the pound in the short term.
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
Crossing the upper border of the indicator in the area of 1.3536 will lead to the growth of the pound. A breakthrough of the lower boundary in the area of 1.3495 will increase 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.
