To open long positions on GBP/USD, you need to:
In my morning forecast, I paid special attention to the level of 1.4201 and recommended opening long positions from it to continue yesterday's upward trend. Let's look at the 5-minute chart and talk about what happened. It is clear that after the good data on activity in the manufacturing sector and the services sector in the UK, the bulls have intensified, reaching beyond the resistance of 1.4201. But it is fair to say that I was waiting for the reverse test of this level from top to bottom, but it did not happen, so I did not manage to enter long positions from this level. In general, the upward movement from 1.4201 was about 30 points. Thus, those who bought above 1.4201 could well earn normally. We have not yet reached the target value, and there is a downward correction to the level of 1.4201, from which we will again start.
At the moment, 1.4201 should be considered as a support, which buyers should do their best to protect. The formation of a false breakout forms a good signal for the continuation of the growth of the British pound in the second half of the day. Meanwhile, there are several problems. One of them is that today is Friday, and after updating the monthly maximum, no people were willing to buy at the end of the week. The second problem is that in the second half of the day, the US PMI index report is released, which can significantly strengthen the position of the US dollar. Therefore, only the formation of a false breakdown in the region of 1.4201 will result in a new buy signal, which should be implemented immediately. Suppose we do not see a strong upward movement from the level of 1.4201, or the pair returns below this range at all. In that case, I recommend that you postpone long positions immediately for a rebound until the new local minimum is updated in the area of 1.4151, from where you can expect a rebound of 15-20 points within the day. If the bulls manage to protect the support of 1.4201, then we can expect an update of the next monthly high in the area of 1.4257, where I recommend taking the profits.
To open short positions on GBP/USD, you need to:
It is time for the bears to think about how to regain control of the support of 1.4201. They are counting on good data for the United States. Only a decline and a reverse test of the level of 1.4201 from the bottom up to form a signal to open short positions in the expectation of a return to the support of 1.4151, where I recommend taking the profits. There are also moving averages that play on the side of euro buyers. A break in this range will bring the pound down to 1.4101. If the growth of GBP/USD continues in the second half of the day, it is best not to rush to sell: the optimal scenario will be short positions in the resistance area of 1.4257 but subject to the formation of a false breakdown there. You can sell the pound immediately for a rebound only from the maximum of 1.4310, based on a downward correction of 20-25 points within the day.
Let me remind you that the COT reports (Commitment of Traders) for May 11 recorded an increase in both long and short positions. All this happened against the background of a small downward correction of the pair, which was completely recouped after good indicators on the rate of contraction of the UK economy in the 1st quarter of this year. The growth last month also gave hope that the British pound will continue to gain strength. As early as early summer, almost all quarantine restrictions will be lifted in the UK. Given the excellent pace of vaccination against coronavirus, we can assume a sharp recovery in GDP in the 2nd quarter of 2021, which will be the highest in the history of this indicator. Such news strengthens investors' confidence in the British pound and its prospects. The COT report shows that long non-profit positions rose from the level of 52,262 to the level of 64,947. At the same time, short non-profit positions rose from 32,414 to 36,771, bringing the non-profit net position to 28,176 from 19,848 a week earlier. Last week's closing price also jumped significantly, to 1.41308 against 1.39033.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 daily averages, which indicates the continued growth of the pound.
Note: The period and prices of the 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 break of the upper limit of the indicator in the area of 1.4210 will lead to a new wave of growth of the pound. A break of the lower limit in the area of 1.4165 will increase the pressure on the pound.
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 specific 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.
