To open long positions on GBP/USD, you need:
I did not enter the market despite the fact that a fairly large upward movement of the pound took place yesterday morning. I waited for a return and a false breakout at 1.3669 and only then did I plan to open long positions at these prices. Rising to the new resistance at 1.3716, which took place in the first half of the day, resulted in this level constantly being tested from top to bottom. At the very beginning, this resulted in creating a good entry point for sustaining the pair's growth. But then, as the bears were constantly smearing this level, and the upward movement was interrupted each time at around 1.3735, it ended up showing a result of only 20 points in profit, I left long positions in order not to get into a reverse downward correction, like the one which could be observed the day before.
The pound buyers are currently focused on protecting support at 1.3704, which was formed by the results of the US session. The pair's succeeding direction depends on it. Forming a false breakout there in the first half of the day will make it possible for us to expect that the pound would rise to an annual high of 1.3743. A breakout of 1.3743 and being able to test this area from top to bottom will hit a number of buyers' stop orders and result in a new strong bullish momentum and an exit to the 1.3803 high, where I recommend taking profits. The downward correction for the pound will intensify if bulls cannot protect support at 1.3704 in the first half of the day, and today we have a number of important fundamental reports on retail sales and activity in the service sector and manufacturing in the UK. In this case, it is best not to rush into long positions, but wait until support at 1.3669 has been updated, from which a new wave of growth was formed yesterday. However, I recommend buying the pound from there only if a false breakout is present. If bulls are not active at this level, I recommend postponing longs until the low of 1.3624 has been tested, where you can open long positions immediately on a rebound, counting on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
The bears will do their best to regain control of the 1.3704 level and rely on weak fundamental statistics at the end of last year. The main thing is that the final data diverges with economists' forecasts for the worse. After getting the pair to settle below the 1.3704 range and testing it from the bottom up, one can expect a resumption of the downward correction and being able to return to the 1.3669 area. We can only talk about a more powerful bearish momentum when sellers have finally achieved a breakdown of this level, as this will open a direct road for GBP/USD to the lows of 1.3624 and 1.3585, where I recommend taking profits. You have to be very careful with short positions in case the pair grows in the first half of the day. Forming a false breakout in the resistance area of 1.3743 generates a signal to open short positions. I recommend selling GBP/USD immediately on a rebound from a high of 1.3803, counting on a small correction of 25-30 points within the day.
The Commitment of Traders (COT) report for January 12 recorded an increase in both long and short positions, but there were more of the first ones, which caused the delta to increase. Long non-commercial positions increased from 35,526 to 47,935. At the same time, short non-commercial positions increased from 31,861 to 34,993. We can see that sellers turned out to be much less than new buyers. As a result, the non-commercial net position rose to 12,942 against 3,665 a week earlier. All this suggests that traders continue to bet on the strengthening of the pound, even in the face of the new Covid-19 strain, for which there is no vaccine yet. The demand for the pound is limited by quarantine measures in the UK, which will sooner or later be canceled after the infection situation stabilizes. The Bank of England's recent refusal to introduce negative interest rates and the pound's decline earlier this year have brought many large medium-term buyers back into the market, expecting a continuation of the bull market this spring.
Indicator signals:
Moving averages
Trading is carried out just above the 30 and 50 moving averages, which indicates succeeding growth for the pair.
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
A breakout of the upper border of the indicator at 1.3743 will lead to a new wave of growth. A break of the lower border of the indicator in the 1.3704 area 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. 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.
- Non-commercial short 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.
