To open long positions on GBP/USD, you need to:
In my morning forecast, I paid attention to the level of 1.3862 and recommended actions based on it. Let's look at the 5-minute chart and talk about what happened. The whole focus was on fundamental statistics on the UK economy. Traders were concerned about the report on the consumer price index and industrial production. The data turned out to be much better than economists' forecasts, which did not allow the bears to continue the downward correction of the pair, which was observed yesterday. As a result: an unsuccessful attempt to consolidate below 1.3862 and then return to this level. All this points to an attempt by the bulls to resume the upward trend, which will depend on a number of conditions, which we will discuss below.
To open long positions, a false breakout from the level of 1.3862 was formed. Its test from the reverse side from top to bottom, to check the presence of buyers, will form an excellent entry point into long positions, which will keep the hope of a recovery in the pound in the afternoon. However, you need to understand that now much will depend on the data on the US economy. With the next rebound of the pair up from the level of 1.3862, you can count on an attempt to return the bulls to control the resistance of 1.3909, where the moving averages play on the side of the sellers of the pound. A breakout and a test of this level from top to bottom will lead to the formation of a new signal to open long positions, the goal of which will be an annual maximum of 1.3954, where I recommend fixing the profits. In the scenario of a lack of activity on the part of buyers in the area of 1.3862, problems may begin. In this case, I recommend postponing long positions until the test of the minimum of 1.3820, from which you can buy the pound immediately on the rebound. The next major support area is visible only in the area of 1.3778.
To open short positions on GBP/USD, you need to:
The bears did not cope with the initial task, and their task remains to break through and consolidate below the support of 1.3862, which can happen only after the release of data on the US economy. The focus will shift to the report on changes in the volume of retail trade in the United States, the producer price index, and changes in industrial production. The bottom-up test of the area of 1.3862 forms an excellent signal to open short positions in the continuation of the pair's fall to the minimum of 1.3820, where I recommend taking the profit. A more distant target will be the area of 1.3778. In the scenario of growth of GBP/USD in the second half of the day after the US reports, it is better not to rush with sales. The optimal scenario is the formation of a false breakout in the area of 1.3909. I recommend opening short positions immediately for a rebound from the maximum of 1.3954, based on a downward correction of 20-25 points within the day.
Let me remind you that the COT reports (Commitment of Traders) for February 9 recorded a sharp increase in long non-commercial positions and a reduction in short ones. This led to a fairly large increase in the positive delta. The bulls are making their way to new highs taking advantage of the good news on vaccination in the UK. Last week's report on UK GDP led only to a larger build-up of long positions in the expectation of a strong economic recovery in early 2021. Long non-profit positions rose from the level of 53,658 to the level of 60,513. At the same time, the short non-profit declined from the level of 44,042 to the level of 39,395, which only strengthened the bullish sentiment. As a result, the non-profit net position rose to 21,118 from 9,616 a week earlier. The weekly closing price was 1.3745 against 1.3675. The fact that the bulls held their positions on such high volatility within the week once again suggests that the pair is clearly set to overcome the annual highs and quickly return to the area of the 40th figure. 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. In March, we expect news about the support of the population and the UK labor market, which also pushes the pound up now.
Signals of indicators:
Moving averages
Trading is conducted below 30 and 50 daily averages, which indicates that the pressure on the pair 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
In the case of growth, the upper limit of the indicator in the area of 1.3910 will act as a resistance. A break of the lower limit in the area of 1.3860 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.
