To open long positions on GBP/USD, you need to:
Last Friday, the British pound managed to get out of the side channel, and now it is actively continuing its growth. In the morning forecast, I paid attention to purchases further along with the trend after the breakout and consolidation of the pair at the level of 1.4062. Let's look at the 5-minute chart and talk about what happened. It is visible how the bulls achieve a breakout of this range on the second attempt and then its reverse test from top to bottom, making sure that a large buyer is present, which took the level of 1.4062. After that, the pound rises by another 30 points, but we have not yet reached the key target in the area of 1.4115. It can be done in the afternoon.
Trading is conducted above the support of 1.4062, so we can expect the pair to continue strengthening in the resistance area of 1.4115, which is the first target of buyers. A breakout and consolidation above 1.4115l will lead to a new bullish impulse in the area of 1.4179, where I recommend taking the profits. In the scenario of a decline in GBP/USD in the second half of the day, the bulls will actively defend the support of 1.4062. However, forming a false breakout will create a good entry point into long positions in continuing the trend. If there is no activity on the part of buyers, I recommend postponing long positions until the update of the morning low of 1.4016, where the moving average plays on the side of the bulls. You can buy the pound immediately for a rebound with a goal of 20-25 points of correction within the day.
To open short positions on GBP/USD, you need to:
Buyers again coped with the task and took a new resistance of 1.4062. Now it's time for the bears to think about how to return it, but before that, there is a more difficult task to protect the resistance of 1.4115. The formation of a false breakout in the second half of the day forms a signal to open short positions. In this case, you can still count on a decline in GBP/USD to the support area of 1.4062, where I recommend taking the profits. A break and consolidation below 1.4062 with a reverse test from the bottom up – all this is a signal to sell the pound with the target of 1.4016. If buyers are stronger and push GBP/USD above 1.4115, it is better not to rush to sell. The optimal scenario for short positions immediately on the rebound will be the level of 1.4179, from where you can count on a downward correction of 20-25 points within the day.
Let me remind you that the COT reports (Commitment of Traders) for April 27 recorded a reduction in both long and short positions, while the total non-commercial net position increased. How it happened - let's figure it out. Last week, we did not see important fundamental statistics for the UK, so all the attention was on the European Parliament's vote on Brexit, the results of which supported the pound. Also, the British prime minister's speeches and the possible earlier lifting of all quarantine restrictions on the territory of Britain allowed buyers of the pound to stick to their scenario for strengthening the pair. All this will continue to contribute to growth in the medium term, so I recommend betting on further strengthening against the US dollar. Any good correction of the pair down is another reason to think about buying the pound, as the prospect of a recovery in the UK economy in the summer period causes a lot of optimism. The COT report shows that long non-profit positions fell from 61,053 to the level of 59,917. At the same time, short non-profit positions fell from the level of 35,875 to the level of 30,699, as a result of which the non-profit net position rose to the level of 29,218 against the level of 25,178 a week earlier. Closing short positions once again indicate the fact that the upward potential of the pound is simply huge. Last week's closing price also fell slightly to 1.38947 against 1.39915.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 daily averages, which indicates the continued growth of the pound.
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 a decline in the pair, the support will be provided by the average border of the indicator in the area of 1.4020.
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.
