To open long positions on GBP/USD, you need to:
In my morning forecast, I paid attention to the level of 1.3820 and recommended to act based on it. Let's look at the 5-minute chart and analyze the entry point. The decline of the pound to the area of 1.3820 was quickly met with sharp purchases from major players, which led to the formation of a false breakout. After that, the pair once again went down to the area of 1.3820 and tested it, forming an excellent entry point into long positions. At the time of writing the article, the signal was formed, the area I've highlighted on the chart.
At the moment, while trading is conducted above the level of 1.3820, the task of the bulls will be to return the pair to the resistance area of 1.3862. However, to maintain the bullish momentum, it is necessary to break through this level with the establishment of a new local maximum, which will lead to the formation of a new upward trend. A test of this area from top to bottom will form an excellent signal to open additional long positions in the continuation of the bull market, which will hit several stop orders of large sellers and lead to a larger increase in GBP/USD to the area of the maximum of 1.3909, where I recommend taking the profits. More persistent buyers will wait for the resistance update of 1.3954. If after the data on the US economy, the bulls will not be able to get above 1.3862, then I recommend taking a profit. In the case of a downward correction and a re-return of the pair to the support area of 1.3820, buying the pound from it will be quite dangerous. In this scenario, I recommend postponing long positions until the test of a larger minimum of 1.3783, from which you can open long positions immediately for a rebound 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 bears did not cope with the task for the first half of the day and failed to take control of the level of 1.3820. Therefore, during the US session, they will need to try hard to prevent a breakout of the resistance of 1.3862. Only the formation of a false breakout there forms a signal to open new short positions to re-decline to the area of the day's minimum to the support of 1.3820. A return to this level will certainly lead to its breakdown, as it is unlikely that buyers will rush to enter the market. Fixing and testing this area from the bottom up forms an additional signal to open short positions in the expectation of a fall in GBP/USD to the minimum of 1.3783, where I recommend fixing the profits. A more distant target will be the area of 1.3732. If there is no activity on the part of sellers in the resistance area of 1.3862, then it is best to wait for growth to a new annual maximum in the area of 1.3909 and sell the pound from there immediately to rebound in the expectation of a decline of 20-25 points within the day.
Let me remind you that the COT reports (Commitment of Traders) for February 2 recorded an increase in both long and short positions. This time, there were more buyers, which led to an increase in the positive delta. The desperate attempts of the bulls to break above the annual highs will sooner or later lead to success, so buyers do not lose hope for the continuation of the bullish trend in February this year. Each major decline in the pound forces major players to increase their long positions in the expectation of a more active recovery of the GBP/USD in the future. Long non-profit positions rose from the level of 47,360 to the level of 53,658. At the same time, the short non-profit rose from the level of 39,395 to the level of 44,042, which did not allow the bears to take control of the market. As a result, the non-profit net position rose to 9,616 from 7,965 a week earlier. The weekly closing price was 1.3675 against 1.3676.
The fact that the bulls held their positions on such high volatility within the week once again suggests that the pair is set to overcome the annual highs. I recommend betting on further strengthening of the pound. As the quarantine measures are lifted, which are expected to be phased out in February this year, demand for the pound will only increase. The support of the population and the labor market, which will be announced in March this year, will also have a positive impact on the British pound. All talk of negative interest rates on the part of the Bank of England was again postponed indefinitely last week, which allowed the British pound to "spread its wings".
Signals of indicators:
Moving averages
Trading is conducted around 30 and 50 daily averages, which indicates the sideways nature of the market.
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 1.3862 will lead to a new wave of growth of the pound. A break of the lower limit in the area of 1.3820 will certainly 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.
