To open long positions on GBP/USD, you need to:
In my morning forecast, I paid attention to the level of 1.3652 and recommended making decisions from it. Let's look at the 5-minute chart and talk about what happened. We can see how a more or less adequate signal to enter the market was formed after the breakdown and consolidation below the support of 1.3652, the test of which from the bottom up (the entry area is marked on the chart) led to the formation of a good signal to sell the pound. However, a movement of about 20 points down and a reversal back – all that was waiting for us in the end.
As a result, we had to revise the entire technical picture. Given that the trade remained in the side channel, the levels changed. In the second half of the day, the bulls need to break above the resistance of 1.3679, where the moving averages play on the side of the sellers. Going beyond this level and testing it from top to bottom forms a fairly good signal to open long positions to return to the resistance of 1.3726, where I recommend taking the profit. It is not yet necessary to talk about updating the annual highs in the area of 1.3765. In the event of a repeated decline in the pound during the US session after the US GDP data for the 4th quarter of 2020, it is better not to rush into purchases, but to wait for the formation of a false breakdown in the support area of 1.3632 or to open new long positions immediately on a rebound from the low of 1.3584 in the expectation of an upward correction of 20-25 points within the day.
To open short positions on GBP/USD, you need to:
The initial target of the bears in the second half of the day will be the support area of 1.3632, as only a break and consolidation below this level with a test on the reverse side will form a signal to open short positions in continuation of the bearish trend that formed yesterday during the US session. In this case, you can expect to reach the next minimum of 1.3584, where I recommend fixing the profit. In the scenario of GBP/USD growth in the second half of the day to the resistance area of 1.3679, the formation of a false breakout forms a signal to open short positions in the expectation of a further decline in the pair. If there is no activity on the part of the bears, I recommend that you do not rush to sell, but wait for the update of the maximum of 1.3726, where you can open short positions immediately for a rebound with the aim of a small correction of 25-30 points within the day.
Let me remind you that the COT reports (Commitment of Traders) for January 19 recorded a reduction in both long and short positions, which indicates a more cautious approach of traders to this trading instrument. Long non-commercial positions fell from 47,935 to 45,904. At the same time, non-commercial short positions fell from 34,993 to 32,199. It can be seen that the decline in short positions is much stronger than long ones. As a result, the non-profit net position increased and amounted to 13,705 against 12,942 a week earlier. And although traders are trying to take a more wait-and-see position in the area of annual highs, and this is a consequence of the fact that it is very difficult for the bulls to update them, the demand for the pound will still be quite high. As the quarantine measures are lifted, which were strengthened due to the new COVID-19 strain, the upward movement of the GBP/USD pair will be more active. The Bank of England's wait-and-see stance on changes in monetary policy also supports the British pound, and the new labor market support program, which was recently proposed by the UK Finance Minister, keeps investors fairly optimistic and confident in the medium-term strengthening of the pair.
Signals of indicators:
Moving averages
Trading is below 30 and 50 daily averages, which indicates that the downward potential for the British pound remains.
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 average border of the indicator in the area of 1.3670 will lead to a new wave of growth of the pound. A break of the lower limit in the area of 1.3632 will increase the pressure on the pair.
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.
al net position is the difference between the short and long positions of non-commercial traders.
