To open long positions on GBP/USD, you should:
In the first half of the day, a buy signal on GBP/USD was formed. Let us turn to the M5 chart and find the entry point. In the morning review, the focus was on the level of 1.3680. Bears were trying to break through 1.3680. However, bulls regained the control of the market quickly and formed a false breakout. Then, the price returned to 1.3680 and tested it from top to bottom. As a result, a buy signal was formed and the pound went up to the resistance level of 1.3730. I suggested setting a Take Profit there. The movement was around 50 pips.
Given that the price has not left the sideways channel, the strategy for the second half of the day remains the same with the only exception: the market is under bulls' control. Therefore, a bullish correction is likely in the second half of the day. Bulls' task would be to break through the resistance level of 1.3730 and consolidate above it. Moving averages that limit the pair's upward potential are also located there. A test of the 1.3730 level from top to bottom will give a buy signal, allowing a recovery of the pound to the resistance level of 1.3789. This is where you should take profit. If there is no bullish activity at 1.3730, you should refrain from buying GBP/USD until there is new price formation: all bulls need is another false breakout at 1.3680. If the price does not rise sharply from 1.3680, you should refrain from entering long positions until the price tests the low of 1.3645. You can open long positions from this level immediately on a rebound, allowing an intraday bullish correction of 20-25 pips.
To open short positions on GBP/USD, you should:
Bear's task for the second half of the day would be to protect the resistance level of 1.3730. Notably, bulls have failed to break through it so far. A false breakout at this level gives a sell signal. Another important task would be to break through the support level of 1.3680 and consolidate below it. Notably, bears failed to do so in the first half of the day. A new sell signal is likely to occur after the price tests 1.3680 from bottom to top. Consequently, the price can go down to the low of 1.3645 and even to 1.3605, where you should take profit. If bears lose control over the resistance level of 1.3730 during the North American session, you should refrain from selling the pair. The best thing to do would be to enter short positions after the test at 1.3789. You could sell GBP/USD immediately on a rebound, allowing an intraday bearish correction of 20-25 pips. The next resistance level is seen at 1.3848.
As a reminder, the COT report (Commitment of Traders) from March 15 logged a decrease in the number of short and long commercial positions. The main problem for risky assets, including the pound, is the spike in US bond yields, which provides strong support for the greenback. Buyers will certainly take advantage of this moment to enter the market at a reasonable price. A quick vaccine rollout in the UK will help ease restrictions faster. In the future, this is likely to lead to a major economic leap in the country and an increase in inflationary pressure. As a result, the Bank of England will have to seriously consider tapering stimulus measures and raising interest rates. All this will have a positive impact on the pound. Long non-commercial positions decreased to 55,190 from 61,271. At the same time, short non-commercials dropped to 26,590 from 27,360, which indicates the possibility of a further decline in number. As a result, the non-profit net position fell to 28,600 from 33,911 a week earlier. The weekly closing price was 1.3898 versus 1.3821. The current bearish correction on GBP/USD is likely to attract new buyers.
Indicator signals:
Moving averages
Trading is carried out close to MA(30) and MA(50), which indicates a sideways market.
Note: Periods and prices of moving averages are viewed by the author of the article on the H1 chart and differ from the general definition of the classic daily moving averages on the D1 chart.
Bollinger Bands
A breakout at 1.3730 is likely to lead to a new rally of the pound. Meanwhile, a breakout of the lower border of the indicator at 1.3670 can increase pressure on the pair.
Description of indicators
- Moving average determines the current trend by smoothing volatility and noise. Period = 50. Marked in yellow on the chart.
- Moving average determines the current trend by smoothing volatility and noise. Period = 30. Marked in green on the chart.
- MACD indicator (Moving Average Convergence/Divergence) Fast EMA period = 12. Slow EMA period = 26. SMA period = 9
- Bollinger Bands. Period = 20
- Nonprofit traders are speculators 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.
- Non-commercial short positions represent the total short open position of non-commercial traders.
- The total non-commercial net position is the difference between short and long positions of non-commercial traders.
