To open long positions on GBP/USD, you need:
In my afternoon forecast, I drew attention to breaking through resistance at 1.3907, but complained that it was not possible to take a convenient entry point from it, since the reverse test did not take place. I also said that I would wait for this test to happen and make a decision on entering the market. Let's take a look at the 5-minute chart and talk about what ultimately happened. You can clearly see how the bears are testing the 1.3907 level from top to bottom, which is necessary, but they failed to go even further below this area. As a result, an excellent signal was formed for opening long positions in sustaining the bull market, which brings more than 70 points of profit. We fell short of reaching the target level quite a bit.
A report on the UK services sector will be released this morning, as well as the publication of the UK's annual budget, which may lead to a fairly strong surge in market volatility. The pound will be particularly active during the speech of the UK Treasury Secretary on the support of the labor market. In case we receive good data, an important task for buyers will be to break out and settle above resistance at 1.3969. A downward test of this level creates a signal to buy GBP/USD for the purpose of rising to a high of 1.4062, where I recommend taking profits. The succeeding target will be resistance at 1.4115. In case the pound falls in the morning, it is best to wait for the 1.3862 low to be tested and open long positions from there, counting on a rebound of 30-35 points within the day. If buyers are not active in the 1.3862 area, then I recommend postponing long positions until a low like 1.3775 has been tested, from which you can also buy the pound immediately on a rebound.
To open short positions on GBP/USD, you need:
The initial task of the bears is to form a false breakout in the resistance area of 1.3969. This scenario, along with weak data on the UK services sector, can create a signal to open short positions in anticipation of the resumption of the bear market and push GBP/USD to fall to the 1.3862 area, where I recommend taking profits. The succeeding target will be the area of 1.3775. If bears are not active in the 1.3969 area after we have received a number of fundamental data on the British economy, then it would be best not to rush to sell the pound. I recommend opening short positions immediately on a rebound but only from a high like 1.4062, counting on a downward correction of 30-35 points within a day. The next major resistance area is seen around 1.4115.
The Commitment of Traders (COT) report for February 23 revealed that short commercial positions decreased while long positions sharply increased. Bulls are active even in the area of annual highs, which only accelerates the upward trend. However, you need to understand that this report only considers prices before the pound started to fall in the middle of last week, so the picture is slightly different. In the medium term, the downward correction observed last week will only play into the hands of bulls. The anticipation of a quarantine rollback in March will support the pound, and so do new measures to help the UK population in the fight against the coronavirus pandemic, which will be announced by Treasury Secretary Rishi Sunak this week. Long non-commercial positions rose from 60,269 to 68,266. At the same time, short non-commercials fell from 38,102 to 37,288, which retains good prospects for the pound to continue its gains. As a result, the non-commercial net position rose to 30,978 from 22,167 a week earlier. The weekly closing price was 1.4067 against 1.3914. The observed downward correction in the pound will only attract new buyers.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates an attempt by the bulls to reverse the downward trend.
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 in the area of 1.4000 will lead to a new wave of growth for the pound. In case the pair falls, support will be provided by the lower border of the indicator in the area of 1.3880.
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.
- Short non-commercial 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.
