To open long positions on GBP/USD, you need to:
In my morning forecast, I paid attention to the level of 1.3947 and recommended that you make decisions on entering the market from it. Let's look at the 5-minute chart and analyze the trades: it is visible how the bulls achieve a breakout of the resistance of 1.3947, but then there is a quick return to this level, which leads to the formation of a false breakout. However, it was not possible to wait for a quick movement of the pair down, after which the bulls repeatedly try to break above the resistance of 1.3947 – and they succeed. In this scenario, it was necessary to exit short positions, as the probability of a further decline in the pair was very much reduced. Those who remained in the market still waited for the pound to fall, and at the time of writing, the downward movement has already amounted to more than 25 points.
The technical picture after the morning trading did not change much, except for the control of the market by the sellers of the pound. Important fundamental statistics are not expected in the second half of the day, so the pressure on the pair may continue. The task of buyers is to protect the support of 1.3897, in the area of which the GBP/USD is now declining. The formation of a false breakout will form a signal to open long positions in the expectation of resuming the upward trend, and the nearest target will be the resistance of 1.3953, which could not be broken above at the entrance of the European session. Only a break of 1.3953 with a test of this level from top to bottom forms an additional signal to buy the pound already to reach the maximum of 1.3999, where I recommend taking the profits. In the scenario of a lack of activity in the support area of 1.3897, it is best to postpone long positions until the test of the minimum of 1.3855, from where you can buy GBP/USD immediately for a rebound in the expectation of a correction of 30-35 points within the day. The next major support area is seen around 1.3812.
To open short positions on GBP/USD, you need to:
The bears coped with the task for the first half and did not let the pair go above the resistance of 1.3947. As long as trading is conducted below this range (the level is revised at 1.3953), the pressure on the pound will remain. The bears' goal for the second half of the day remains to break through and consolidate below the support of 1.3897, which they have already tested several times. Only an update of this level from the bottom up will form a good signal to open short positions in the continuation of the downward correction of the pair with an exit to the minimum of 1.3855. The longer-term goal is the support of 1.3812, where I recommend taking the profit. This level acts as a kind of lower border of a wide side channel, in which the pound is located for quite a long time. Its breakdown forms a new major bearish trend. In the case of GBP/USD growth in the second half of the day back to the resistance of 1.3953, only the formation of a false breakout there will form a new entry point into short positions in the expectation of continuing the downward correction of the pair at the end of the day. In the absence of bear activity in the resistance area of 1.3953, it is best not to rush to sell: you can open short positions immediately on a rebound only from the maximum of 1.3996, counting on a downward correction of 30-35 points within the day. The next major resistance area is seen around 1.4062.
Let me remind you that the COT reports (Commitment of Traders) for March 9 recorded a reduction in both short and long commercial positions. This time, the closing of long positions was quite strong, which led to a reduction in the positive delta. The main problem for risky assets, which include the British pound, remains the growth of US bond yields, which provides serious support to the US dollar. However, in the medium term, buyers of the pound will certainly take advantage of this moment to enter the market at more attractive prices. The beginning of the curtailment of quarantine measures in March this year will continue to provide the main support to the pound, as will new measures to help the UK population in the fight against the coronavirus pandemic. Long non-profit positions declined from 65,138 to 61,271. At the same time, short non-profit positions declined from 29,056 to 27,360, which indicates a possible further decline in the pair. As a result, the non-profit net position fell to 33,911 from 36,082 a week earlier. The weekly closing price fell to 1.3821 against 1.3928. The observed downward correction in the pound will attract new buyers.
Signals of indicators:
Moving averages
Trading is conducted around 30 and 50 daily averages, which indicates the sideways nature of the market and the lack of certainty.
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 1.3953 will lead to a new wave of growth of the pair. A break of the lower limit of the indicator in the area of 1.3895 will increase the pressure on the pound.
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.
