To open long positions on GBP/USD, you need:
As the result showed: last Friday was not the best day for trading the British pound. In my morning forecast, I drew attention to the level 1.3947 and advised you to make decisions on entering the market. At the beginning, the bulls tried to break through resistance at 1.3947, but then there is a quick return under this level, which leads to forming a false breakout. It was not possible to wait for the pair to sharply fall, afterwards the bulls tried to rise above resistance at 1.3947 again - and they succeeded. In such a scenario, it was necessary to get out of short positions, since the likelihood of a succeeding decline was greatly reduced. However, those who stayed in the market still waited for the target level around 1.3897 to be tested. In the afternoon, I recommended opening short positions after a breakthrough of 1.3897 and a reverse test of this level. However, the chart shows that a breakout has occurred, but no convenient entry point has been formed. The pound immediately fell to the support area of 1.3855 and it created a signal to buy the pound immediately upon a rebound. As a result, an upward correction at the end of the day was around 30 points.
The bears are still in control of the market and the bulls need to try their best in straining the pair from going beyond the wide horizontal channel, as this will lead to a new medium-term bear market. The initial task of the bulls is to protect support at 1.3812, in the area of which the sellers quickly pushed the pair after this morning's Asian gap. Forming a false breakout there creates a signal to open long positions in hopes to restore the upward trend, and the nearest target will be resistance at 1.3859, rising above which will also be the main task. Only a breakout and consolidation above 1.3859 along with being able to test this level from top to bottom can create another signal to buy the pound for the purpose of reaching a high like 1.3905, where I recommend taking profits. Moving averages, playing on the side of sellers, also pass there. In case traders are not active in the support area of 1.3812, then it would be best to postpone long positions until the 1.3745 low has been tested from where you can buy GBP/USD immediately on a rebound, counting on a correction of 30–35 points within the day.
To open short positions on GBP/USD, you need:
The initial task is to settle below support at 1.3812 and go even further, which they tested last Friday. Updating this level from the bottom up will create a good signal to open short positions in order to continue the pair's downward trend so it can reach a low like 1.3745. Updating the 1.3745 level can pull out the pair from the wide horizontal channel, in which it has been since February. The succeeding target is support at 1.3680, where I recommend taking profits. In case GBP/USD grows in the first half of the day, the bears must protect resistance at 1.3859, from where the Asian gap formed today. Forming a false breakout there will create a new entry point for short positions, counting on the continuation of the pair's downward correction. If bears are not active in the resistance area at 1.3859, then it would be best not to rush to sell: you can open short positions immediately on a rebound from the 1.3905 high, counting on a downward correction of 30–35 points within the day. The next major resistance area is seen around 1.3953.
The Commitment of Traders (COT) report for March 9 revealed a reduction in both short and long commercial positions. This time, the closing of long positions became quite strong, which led to a reduction in the positive delta. The main problem for risky assets, which can be attributed to the pound, is still the growth in the yield of US bonds, 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 quarantine measures in March will continue to provide the main support for the pound, as well as new measures to help the UK population in the fight against the coronavirus pandemic. Long non-commercial positions declined from 65,138 to 61,271. At the same time, short non-commercials declined from 29,056 to 27,360, indicating a succeeding decline for the pair. As a result, the non-commercial net position fell to 33,911 from 36,082 a week earlier. The weekly closing price dropped to 1.3821 against 1.3928. The observed downward correction in the pound will attract new buyers.
Indicator signals:
Moving averages
Trading is carried out below 30 and 50 moving averages, which indicates a continuation of the downward trend for the pound.
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 lower border of the indicator in the 1.3805 area will increase the pressure on the pair. If the pound rises, the upper border of the indicator at 1.3940 will act as a resistance.
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.
