To open long positions on GBP/USD, you need:
Yesterday, several signals were formed to enter the market only in the afternoon. I suggest we take a look at the 5-minute chart and figure out what happened. In my morning forecast, I paid attention to several levels and advised you to make decisions on entering the market. An overly low volatility in the morning against the background of the absence of important fundamental statistics for the UK, as well as uncertainty about the future policy of the Federal Reserve - all this pushed the pair to remain in the horizontal channel without updating the nearest support and resistance levels. In the afternoon, even before the announcement of the Fed's decision, the bulls climbed above 1.3084 and settled in this range. Bulls persistently protected this level after the top-down test and it had created excellent entry points into long positions. However, there was no major growth and the most that could be counted on was 30 points of profit.
Today is a very important day for us. In general, we did not learn anything new from the Fed yesterday – the committee acted strictly according to the plan announced earlier. Fed officials, led by Chairman Jerome Powell, voted 8-1 in favor of raising the key rate to between 0.25% and 0.5%, which is the first increase since 2018. Today we will have a more important meeting from the Bank of England. As expected, the central bank will act more aggressively with regard to interest rates and raise them to the level of 0.75%. This is a good bullish signal for traders, but it should be understood that the expected increase is not a surprise, and if the BoE prefers to act more calmly, following the example of the Fed, it may even lead to a decline in the pound, which has been feeling pretty bad lately.
The bulls will try to cling to the resistance of 1.3190 during the first half of the day. During the European session, it is important to protect the support of 1.3122 – a new level, which, it seems to me, is now of great interest to pound bulls. You can consider long positions from it only after forming a false breakout and after analyzing the BoE's statements. Growth in this scenario will pull the pair to the resistance of 1.3190. Only a breakthrough and a reverse test of this area from top to bottom of this range, which can be counted on after the announcement of changes in the British central bank's policy, will lead to the demolition of a number of bears' stop orders, allowing the bulls to get out to the highs: 1.3244 and 1.3275. The 1.3314 area will be a more distant target, but we may get access to it in case we receive good news on the negotiations between Russia and Ukraine. I recommend taking profits there. In case GBP/USD falls during the European session and the bulls are not active at 1.3122, and just below this level there are moving averages playing on the bulls' side, it is best to postpone long positions against the trend until the next support of 1.3076 – this is a more reliable level. But I also advise you to open long positions there only when a false breakout is formed. You can buy GBP/USD immediately on a rebound from 1.3023, or even lower - from a low like 1.2966, counting on a correction of 30-35 points within the day.
To open short positions on GBP/USD, you need:
Bears are not so active lately, and we can understand that. Quite a lot depends on today's results of the meeting. If there is no surge in volatility after the decision is announced, most likely the pressure on the pound will gradually begin to return. However, the decline in GBP/USD will be limited, as good news on the negotiations between Russia and Ukraine, as well as the likely improvement in the geopolitical situation in the world will contribute to the demand for risky assets. The main goal for today is the support of 1.3122. A breakthrough and a reverse test from the bottom up of this range will form a sell signal, which will open a direct road to the lows: 1.3076 and 1.3023, where I recommend taking profits. A more distant target will be 1.2966. However, such a sharp drop in the pair will occur only under the worst scenarios and the assessment of the economy from the BoE. In case GBP/USD grows in the first half of the day, forming a false breakout at 1.3190 will lead to a sell signal for the pound with the prospect of a new decline in the pair. With bears not being active at this level, it is best to hold back from short positions until the next major resistance of 1.3244. I also advise you to open short positions there in case of a false breakout. You can sell GBP/USD immediately for a rebound from 1.3275 or even higher - from a high of 1.3314, counting on the pair's correction down by 20-25 points within the day.
I recommend for review:
The Commitment of Traders (COT) reports for March 8 showed a sharp increase in both long and short positions. Some took advantage of the panic in the market, others had attractive prices. However, there were more of those who increased short positions, which led to an increase in the negative delta. This week we have the Federal Reserve meeting, and how the US central bank will behave in the conditions of the highest inflation in the last 40 years is a big question. A more active policy on interest rates will increase the demand for the US dollar, which is already trampling the British pound almost every day to the next annual lows. We also remember that although Russia and Ukraine have sat down at the negotiating table, so far these meetings do not give any special results. Against this background, I recommend continuing to buy the dollar, since the bearish trend for the GBP/USD pair has not gone away. The only thing that saves the pound from a major sell-off is high inflation in the UK, which will force the Bank of England to be more active as well. The very next day after the Fed meeting, the BoE will hold a meeting. This is where a reversal of the pound can occur in the opposite direction, so think about it when selling at the lows of GBP/USD. The COT report for March 8 indicated that long non-commercial positions increased from the level of 47,679 to the level of 50,982, while short non-commercial positions increased from the level of 48,016 to the level of 63,508. This led to an increase in the negative value of the non-commercial net position from -337 to -12,526. The weekly closing price dropped to 1.3113 against 1.3422.
Indicator signals:
Trading is conducted above the 30 and 50 moving averages, which indicates an attempt by the bulls to continue the growth of the pair.
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 the pair falls, the lower limit of the indicator in the area of 1.3076 will act as support. In case of growth, the upper limit of the indicator around 1.3175 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.
