To open long positions on GBP/USD, you need:
Several signals to enter the market appeared yesterday. Let's look at the 5-minute chart and analyze the deals: you can see how the bulls managed to rise above 1.3797, but they failed to maintain control of this level. The reverse test of 1.3797 after its breakout in the first half of the day did not take place, so I was forced to skip this purchase. Then it rose to the resistance area of 1.3846, where I advised you to open short positions immediately on a rebound. The move down from that level was around 50 points. After the pound returned to the area below the 1.3797 level in the afternoon, a reverse test of this area from the bottom up created another good entry point for short positions, which led to a renewal of the 1.3752 low and brought around 40 more points of profit.
Before examining the technical picture of the pound, let's take a look at what happened in the futures market. The pound is still under pressure, which is clearly seen on the chart, although buyers became more active at the end of last week. The Commitment of Traders (COT) report for March 23 showed that long positions decreased while short ones increased. The pound fell due to the strong dollar, as the US is showing reasonably good growth rates after an active vaccination program carried out this winter and the implementation of a $1.9 trillion support plan. But it is worth paying attention to the fact that recent reports on the UK economy have been quite good, which could be the first signal for the pound's bulls, who are counting on an active medium-term growth of the pair this spring. Given that the data in the COT reports are lagging behind, the picture could dramatically change by the end of this week. There is a growing confidence among investors and economists that a recovery in the UK is just around the corner. This is confirmed by the fact that disagreements are growing in the Bank of England over how the economy will develop further and how to react to this. Those who expect to buy the pound should take a closer look at the market. And so, long non-commercial positions fell from 55,190 to 51,843. At the same time, short non-commercial positions increased from 26,590 to 30,024, which indicates the sellers' control over the market. As a result, the non-commercial net position fell to 21,819 from 28,600 weeks earlier. The weekly closing price dropped to 1.3859 against 1.3898.
Most likely, the bulls will focus on surpassing resistance at 1.3797 in the first half of the day, which they managed to get out of yesterday, but not hold out. A breakthrough and pushing the pair to settle above this level with a test from the bottom up will only strengthen the pound's position, which will lead to yesterday's high of 1.3846, where I recommend taking profits. The next larger resistance area is seen around 1.3914. In case GBP/USD falls in the morning, all buyers need to do is to protect support at 1.3752. Forming a false breakout there creates an excellent signal to enter long positions as the GBP/USD continues to rise to the resistance level of 1.3797. If bulls are not active in the support area of 1.3752, then it is best not to rush to buy: the best option would be to open long positions immediately on a rebound from the 1.3708 low, counting on an upward correction of 25-30 points within the day. The next big support is seen at the 1.3670 area.
To open short positions on GBP/USD, you need:
The bears' initial task is to regain control of support at 1.3752. Taking into account the fact that the bulls still have the advantage, then only a breakthrough and consolidation below this range with a test from the bottom up will create a good signal to open short positions in hopes to return to the 1.3708 low, where I recommend taking profits. The next target will be last week's low at 1.3670, to which the pair may return in case we receive very good data on the indicator of consumer confidence in the US. In case GBP/USD faces an upward correction in the first half of the day, then it is best not to rush to sell: it is necessary to wait for a false breakout to form in the area where a high like 1.3797 is located and only then should you open short positions in order to resume the bear market. In the event that bears are not active in this range, the best option would be to open short positions immediately on a rebound from the high of 1.3846, counting on a downward correction of 25-30 points within the day. The next major resistance is seen at 1.3914.
Indicator signals:
Moving averages
Trading is carried out below 30 and 50 moving averages, which indicates that the pair's downward correction will continue.
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, support will be provided by the lower border of the indicator in the area of 1.3730. Growth will be limited by the upper line of the indicator in the area of 1.3840.
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.
