To open long positions on GBP/USD, you need:
The expectation that the bears will continue to put pressure on the pound has not been justified. Let's take a look at the 5 minute chart and talk about what happened in the market yesterday. I advised you to open short positions from the 1.3752 level, subject to a false breakout forming there: such a scenario was realized in the first half of the day after the bears managed to protect resistance at 1.3752, but to my great regret, there was no major downward movement, and after a fairly short period of time, the bulls went above 1.3752, which resulted in removing stop orders. I didn't wait for the reverse test of the 1.3752 level, so I was forced to miss the growth that was observed later. Short positions can and should have been opened after the resistance update at 1.3797 (I mentioned this in my review). However, critics can say that we have not reached this level literally by 2 points and they will be right: those who did not wait for the test of the 1.3797 point per point level could have earned more than 40 points of profit on the rebound.
Yesterday's UK GDP report, which turned out to be better than the preliminary estimate, led to a rapid growth in the pound, which did not allow the bears to maintain control over the market. Data on manufacturing activity in the UK will be published today, which is unlikely to be able to lead to a serious surge in volatility, since the manufacturing sector was not badly hit during the coronavirus pandemic. Bulls have a lot of tasks: first they have to protect support at 1.3760, forming a false breakout there generates a signal to enter long positions in hopes that GBP/USD would continue to rise to resistance at 1.3805, beyond which it was not possible to get out of yesterday... Moving averages are just above the 1.3769 level, playing on the side of the pound bulls. The second task is to surpass and settle above resistance at 1.3805, which will strengthen the bulls' positions and lead to a new high of 1.3846, where I recommend taking profits. If bulls are not active in the support area of 1.3760, then it would be best not to rush into long positions: the best option would be to open longs immediately on a rebound from the 1.3719 low, counting on an upward correction of 25-30 points within the day. The next major support is seen at 1.3670.
To open short positions on GBP/USD, you need:
The bears' initial task is to break through and settle below support at 1.3760, which they missed yesterday morning. Moving averages also pass there, so being able to test this level from the bottom up can create a good signal to open new short positions in hopes that it would push GBP/USD to fall to a low in the 1.3719 area, where I recommend taking profits. Testing this area will completely cancel out the bulls' plans for a quick rise in the pound. A very disappointing report on manufacturing activity in the UK, which is unlikely, can lead to a breakthrough and have the pair settle below 1.3719, which will open a direct path to the area of last month's low of 1.3670. If the pound rises in the first half of the day, protecting resistance at 1.3805 will be an equally important task for the bears. Forming a false breakout there creates a good entry point. If the bears are not active then it would be best not to rush to sell, but instead you should wait for the 1.3846 high to be tested, from where you can open short positions immediately on a rebound, counting on a downward correction of 25-30 points within the day. The next major resistance is seen at 1.3914.
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.
Indicator signals:
Moving averages
Trading is carried out below 30 and 50 moving averages, which indicates an attempt by the bulls to pull the cover to their side.
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 1.3805 will lead to a new wave of growth for the pound. A breakthrough of the lower boundary at 1.3760 will increase 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.
