To open long positions on GBP/USD, you need to:
The British pound has every chance of further decline. Let's look at the 5-minute chart and talk about what happened. I recommended starting from the level of 1.4048, where many signals were formed to enter the market. In the first half of the day, there was a breakdown and a reverse test of the level of 1.4048, which led to the formation of a sell signal. However, it only led to losses. A quick return to the level of 1.4048 and a test of it from top to bottom formed a convenient entry point into long positions. Already closer to the middle of the day, the bears achieved a normal breakdown of the support of 1.4048. However, I did not see a reverse test, although everything was going to this. The scenario in which I would open short positions was shown on the chart.
The second half of the day promises to be no less interesting, as the market remains under the control of sellers. The entire focus is now shifted to important data on the US labor market. Poor indicators may strengthen the position of the British pound, which will allow the bulls to regain control of the resistance of 1.4047. A break and a reverse test of this level from top to bottom on the volume will lead to the formation of a signal to open long positions to aim a larger recovery in the area of the maximum of 1.4102, where I recommend taking the profits. There are also moving averages that limit the upward potential of the pair. If the pressure on the pound returns in the second half of the day, and everything is going to this: before opening long positions, it is best to wait to form a false breakout in the support area of 1.4008. Suppose the bulls do not show activity, and the data will be much stronger than economists' expectations. In that case, the optimal scenario will be long positions immediately on the rebound from the support of 1.3970, or even lower – from the level of 1.3921 in the expectation of an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need to:
The bears continue to bend their line, though not as fast as expected. Good data on the US economy may lead to a breakthrough of a new local low of 1.4008. The test of this area from the bottom up forms a new signal to open short positions in the continuation of the downward correction of the pair to the support area of 1.3970. Then possibly to a larger minimum of 1.3921, where I recommend taking the profits. If we see a rise in the pound during the US session, which is quite possible, given the recent problems in the US labor market: the best option for opening short positions will be forming a false breakout in the resistance area of 1.4047. If the bears do not show activity – it is best to postpone short positions until the update of a larger local maximum in the area of 1.4102 in the expectation of a downward correction of 20-25 points within the day. The next major resistance is at the high of 1.4160.
Let me remind you that the COT reports (Commitment of Traders) for May 4 recorded a reduction in long positions and increased short ones. However, the data does not consider Friday's market changes, when the British pound showed a major increase. Last week, we all followed the decision of the Bank of England on interest rates, so traders feared for the further growth of the pound, increasing short positions. Keeping monetary policy unchanged limited the upward potential of the pound. Still, hints from committee members that it was time to think about curtailing stimulus programs breathed new strength into the pound's buyers. Disappointing data on the US labor market will continue to put pressure on the US dollar for a long time at any opportunity. Therefore, the trend for the strengthening of the British pound will continue. The prospect of a recovery in the UK economy in the summer, when all quarantine restrictions will be lifted, also causes a lot of optimism and helps buyers of the pound find excuses to build up positions. The COT report shows that long non-profit positions have declined from 59,917 to the level of 52,262. At the same time, short non-profit positions rose from the level of 30,699 to the level of 32,414, resulting in a non-profit net position falling to the level of 19,848 from the level of 29,218 a week earlier. But the closing price of last week rose to the level of 1.39033 against 1.38947.
Signals of indicators:
Moving averages
Trading is conducted below 30 and 50 daily averages, which indicates that the pressure on the pair remains.
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
If the pound rises, the upper limit of the indicator around 1.4075 will act as a resistance.
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 specific 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.
