To open long positions on GBP/USD, you need to:
In the first half of the day, I paid attention to the level of 1.3685 and recommended to act based on it. Let's look at the 5-minute chart and talk about what happened. We see how the bears attempt to break through 1.3685, but then the pair briefly returns above this level. Another decline in the pound under the support of 1.3685 forms a signal to open short positions in the continuation of the downward trend. However, the downward movement was about 20 points, after which the sellers lost the initiative. In general, if you missed this signal, then you did the right thing, as it was very difficult to determine.
Now the main task of the bulls is to return and consolidate above 1.3685. A test of this level from top to bottom forms a good entry point into long positions in the expectation of recovery of GBP/USD to the resistance area of 1.3742, where I recommend taking the profits. We are unlikely to pass above this level. But if this happens, the next targets will be the highs of 1.3794 and 1.3846. Under the scenario of no bull activity at 1.3685 and good data on the US economy, the pound may resume its decline. In this case, I recommend opening long positions immediately for a rebound from a large support level of 1.3637 based on a rebound of 20-25 points within the day.
To open short positions on GBP/USD, you need to:
The bears' initial target in the afternoon will be to defend the level of 1.3685, which will be quite difficult to do. The next formation of a false breakout after the data on the US economy will return the pressure on the pair, which will push it to the area of the minimum of 1.3637. However, you can count on a larger drop in GBP/USD only after a breakout and consolidation below this level with a test of it on the reverse side, which forms a signal to open short positions already with an exit to the minimum of 1.3584, where I recommend fixing the profits. In the scenario of GBP/USD growth in the second half of the day above the resistance of 1.3685, it is best not to rush to sell. Given that the strength of the bulls will not be enough to break through the annual highs, you can open short positions immediately on the rebound from the resistance of 1.3742 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 conducted around 30 and 50 daily averages, which indicates the sideways nature of the market in the short term.
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 1.3742 will lead to a new wave of growth of the pound. A break of the lower limit of the indicator in the area of 1.3675 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.
