To open long positions on GBP/USD, you need:
In my morning forecast, I paid attention to the level of 1.3239 and recommended making decisions on entering the market. Let's take a look at the 5-minute chart and figure out the entry point. The breakthrough and consolidation above 1.3239 after the release of retail sales data in the UK led to the formation of a buy signal for the pound, as after the reverse test from top to bottom of 1.3239, the bulls managed to protect this range. At the time of writing, there was no major growth in the pound and the upward movement was about 10 points – this is very bad, but apparently, we will have to wait for the reaction of traders to the American session. While trading will be conducted above 1.3239, you can count on a larger leap of GBP/USD up. And what were the entry points for the euro this morning?
Only the current account balance of the US balance of payments is scheduled for the US session, which is unlikely to have a serious impact on the US dollar in the short term. Therefore, the chances of further growth of GBP/USD remain quite good. But as you remember, recently the market does not always do what many expect from it but does just the opposite. Therefore, be careful, and at the first prerequisites for the return of pressure on the pair, you do not need to stay in the morning shopping and wait for a miracle. Now it is very important to keep control over the 1.3239 level. The next formation of a false breakdown on it, together with weak statistics on the United States, will strengthen the position of buyers, which forms an additional signal to open long positions based on the growth of the pound in the resistance area of 1.3271. A breakout and a test of 1.3271 will be no less important tasks, since going beyond this range will allow the bulls to strengthen their positions to update 1.3301, where I recommend fixing the profits. The longer-range target remains the resistance of 1.3336. In the scenario of a decline in the pound during the US session and a return to the level of 1.3239, it is better to get out of morning purchases and wait for new signals. The best option would be long positions with a decline in GBP/USD and the formation of a false breakdown in the support area of 1.3200. It is possible to open long positions in GBP/USD immediately for a rebound at a minimum of 1.3173, or even lower - from 1.3111, counting on a correction of 20-25 points within a day.
To open short positions on GBP/USD, you need:
The bears did not cope with the morning task and missed the resistance of 1.3239. Now it is necessary to return this range under control since, in the case of a further rise in the pound, it is possible to completely lose the entire initiative received last Friday. Only a return and consolidation below 1.3239, followed by its protection and a bottom-up test, will lead to the first signal to open short positions to update the 1.3200 minimum. Only a breakout and a reverse test from the bottom up of this range will give an additional entry point for the sale of the pound with a promising further correction of the pair to 1.3173 and 1.3111. The minimums will be a more distant target: 1.3070 and 1.3034, the update of which will indicate the resumption of the medium-term bearish trend for the pound. If the pair grows during the American session, the bears need to defend the resistance of 1.3271. Only the formation of a false breakdown there will give an excellent signal to open short positions. In the case of weak fundamental statistics for the United States and the absence of sellers' activity there, I recommend postponing sales to a larger resistance of 1.3301. I also advise you to open short positions there only in case of a false breakdown. It is possible to sell GBP/USD immediately for a rebound from the maximum of 1.3336, or even higher - around 1.3372, counting on the pair's rebound down by 20-25 points within a day.
In the COT reports (Commitment of Traders) for December 14, a reduction in both short and long positions was recorded. Considering that long positions were reduced by almost half, this led to serious changes in the negative delta. However, it is worth noting that these data do not take into account the results of the meeting of the Federal Reserve System and the Bank of England. But if you look at the big picture in general, the prospects for the British pound look rather sad. After the Bank of England's decision to raise interest rates, the pair shot up, but the next day it underwent a hard sell-off, which knocked many market participants out of the saddle, hoping for the end of the bearish trend. The US dollar will continue to be in demand amid uncertainty with the new strain of the omicron coronavirus, which is spreading at a fairly rapid pace, scaring market participants from active actions: no one wants to buy an overbought dollar, but the cheap pound is also not a very attractive tool yet. Until the situation with the next wave of coronavirus returns to normal, it will be quite problematic to talk about the growth of the pound. However, high inflation remains the main reason why the Bank of England will continue to raise interest rates next year, which will support the British pound. The COT report for December 14 indicated that long non-commercial positions fell from the level of 48,950 to the level of 29,497, while short non-commercial positions fell from the level of 87,227 to the level of 80,245. This led to an increase in the negative non-commercial net position from 38,277 to -50,748. The weekly closing price sank from 1.3262 to 1.3213.
Signals of indicators:
Moving averages
Trading is conducted just above 30 and 50 daily moving averages, which indicates an attempt by the bulls to take control of the market.
Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger Bands
In case of a decline in the pair, the lower limit of the indicator in the area of 1.3185 will act as support.
Description of indicators
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit 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 the short and long positions of non-commercial traders.
