To open long positions on GBP/USD, you need:
In my morning forecast, I paid attention to the 1.3730 level and recommended making decisions on entering the market from it. Let's take a look at the 5-minute chart and figure out the entry points. A false breakout formed in the first half of the day at this level led to a good signal to sell the pound. However, I did not wait for the pair to fall and move against the trend. The breakthrough and consolidation with the reverse test of 1.3730 already in the middle of the European session led to the formation of a buy signal for GBP/USD, which is valid at the time of writing. In total, the pair has passed from the entry point for more than 20 points. In the afternoon, the technical picture changed a lot. And what were the entry points for the euro this morning?
The primary task of buyers for today is to protect the support of 1.3716, which was formed based on the results of today. The formation of a false breakdown at 1.3716 forms an additional buy signal with the prospect of continuing the bull market aimed at updating the new resistance at 1.3766. A breakdown and test of this level from top to bottom, together with weak inflation data in the US, will give an additional entry point, which will strengthen the position of buyers to continue the growth of GBP/USD to the highs: 1.3809 and 1.3842. A more distant target will be the 1.3864 area, where I recommend fixing the profits. In the scenario of a decline in the pound during the US session and a lack of activity at 1.3716, and this will happen only in the case of very hawkish statements by representatives of the Federal Reserve System, it is best to postpone purchases to the level of 1.3670, where the moving averages are playing on the buyers' side. To miss this area is tantamount to missing the initiative. Only the formation of a false breakdown there will give an entry point in the expectation of further recovery of GBP/USD. You can buy the pound immediately on a rebound from 1.3620, or even lower - from a minimum of 1.3566, counting on a correction of 20-25 points within a day.
To open short positions on GBP/USD, you need:
Bears have nothing to offer yet to somehow influence the bullish trend. Perhaps today's data on producer prices in the US will change the situation, but given that yesterday the market only grew after the US consumer price index, it is unlikely that traders will seriously bet on the completion of the bullish trend in the pound after the PPI report. Most likely, it will be within the forecast of economists, which will allow the Fed to pursue a less aggressive policy. The primary task for today is to protect the next resistance of 1.3766, as the pair's exit above this range will create several technical problems and lead to the continuation of the bullish trend. The formation of a false breakdown at this level forms the first entry point into short positions, followed by a decline in the pair to the area of 1.3716, which was formed at the end of the first half of the day. A breakdown of 1.3716 and a reverse test from the bottom up will increase pressure on the pound and dump it to the next support of 1.3670, where the moving averages are playing on the buyers' side. Only the consolidation and the reverse test of 1.3670 from the bottom up will give a new entry point into short positions with the prospect of a decline in GBP/USD by 1.3620 and 1.3566, where I recommend fixing the profits. If the pair grows during the American session and sellers are weak at 1.3766, it is best to postpone sales to a larger resistance of 1.3809. 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 a large resistance of 1.3842, or even higher - from a new maximum in the area of 1.3864, counting on the pair's rebound down by 20-25 points inside the day.
The COT reports (Commitment of Traders) for January 4 recorded a sharp increase in long positions and a reduction in short positions - which indicates an increase in the attractiveness of the pound after the Bank of England raised interest rates at the end of last year. If you look at the overall picture, the prospects for the British pound look pretty good. The Bank of England's decisions continues to support buyers of risky assets in the expectation that the regulator will continue to raise interest rates this year, which will make the pound even more attractive. High inflation remains the main reason why the Bank of England will continue to tighten its monetary policy. On the other hand, the US dollar also has support: inflation data in the US are expected this week, which, together with the recent report on the US labor market, will certainly force the Federal Reserve System to act more aggressively. The first interest rate hikes are planned in the spring, which will make the US dollar more attractive. The COT report for January 4 indicated that long non-commercial positions rose 20,824 to the level of 25,980, while short non-commercial positions fell from the level of 78,510 to the level of 65,151. This led to a serious change in the negative non-commercial net position from -57,686 to -39,171. The weekly closing price rose from 1.3209 to 1.3482.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 daily moving averages, which indicates the continuation of the pound's growth further along with the trend.
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
A breakthrough of the upper limit of the indicator in the area of 1.3740 will lead to a new wave of growth of the pound. In case of a decline, the lower limit of the indicator in the area of 1.3670 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.
