To open long positions on GBP/USD, you need:
Several rather interesting signals to enter the market were formed yesterday. Let's take a look at the 5-minute chart and analyze all the entry points. You can clearly see how the bears tried to fall below the level of 1.4108 several times, but to no avail. All this leads to forming a signal for opening long positions in order to sustain the bullish scenario, after which the pair returns to the resistance area of 1.4155, where I recommended taking profits. The movement was about 50 points. In the afternoon, several unsuccessful tests of this resistance created a signal to open short positions, but the downward movement was less impulsive, although it amounted to around 35 points.
From a technical point of view, nothing has changed much, as well as the scenario according to which we will trade today. The pair's succeeding direction will be set by reports on the UK economy, of which we will receive quite a lot today. It will start with GDP and end with the UK Service and Construction Activity Index. If expectations do not match forecasts, it is likely that the pressure on the pound will increase. In the meantime, the market remains on the side of the bulls. Forming a false breakout at the level of 1.4108 generates a signal to open long positions in continuation of the bull market that we have been observing since the end of last week. In such a scenario, one can again count on an update and test of resistance at 1.4155, above which it was not possible to surpass yesterday. If traders are pleased with the reports, and the pound regains strength, then the main task of the bulls will be to surpass resistance at 1.4155. After testing this level from top to bottom, you can safely open new long positions in continuation of the bullish trend in order to update the 1.4201 high, where I recommend taking profits. The next big resistance is at 1.4241. If the bulls are not active in the support area at 1.4108, and the reports turn out to be disappointing, then it is best not to rush into long positions. The optimal scenario would be longs immediately to rebound from a low like 1.4062, or even lower - from the level of 1.4016, counting on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
Another test of support for 1.4108 may turn out to be successful. Therefore, the bears will be focused on this level in the first half of the day. Yesterday, Bank of England Governor Andrew Bailey did not say anything interesting, so today, the whole emphasis is on the report on the UK economy. A disappointing result could increase the pressure on the pair and disappoint the optimists who believe in the pound's strength. A breakthrough and consolidation below the level of 1.4108 with a reverse test of it from the bottom up can create a good entry point to short positions in hopes of returning to the area of 1.4062, where the moving average is passing, playing on the side of the bulls. The next target will be the level of 1.4016, where I recommend taking profits. If we see the pound rising during the European session, and this will happen only in case we receive very good macroeconomic statistics, then the best option for opening short positions will be forming a false breakout in the resistance area of 1.4155. If the bears are not active there, and the UK report once again surprises the markets, then it is best to postpone short positions until a larger local high at 1.4241 is renewed, counting on a downward correction of 20-25 points within the day.
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 in the area of 30 and 50 moving averages, which indicates further problems with the pound's growth.
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 1.4170 will lead to a new wave of growth for the pound. Surpassing the lower border of the indicator in the area of 1.4105 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.
