To open long positions on GBP/USD, you need to:
Due to the low market volatility in the first half of the day, the pound did not manage to reach the indicated levels. In this regard, there were no signals for entering the market. The buyers' attempt to update the resistance at 1.4147 was unsuccessful, and the market growth stopped at 1.4140, where a significant sell-off of the pair to the lows of the day occurred. Against this background, the technical picture and recommendations for the second half of the day remained almost unchanged.
I have revised the nearest resistance level, and now it is around 1.4143. It is what the bulls will focus on this afternoon. The breakdown and test of this level from top to bottom will lead to the formation of a signal to open new long positions in the continuation of the upward trend with the immediate goal of returning to the monthly maximum of 1.4201, where I recommend taking the profit. If you look at the chart, you will see that above 1.4147, there are moving averages that limit the upward potential of the pair. The breakout of the level of 1.4201 will depend on the fundamental data released on the US economy in the second half of the day. If the labor market report shows weakness, then it is likely that buyers of the pound will revive. If the GBP/USD goes beyond 1.4201, the next major resistance will be seen in the area of 1.4257. In the scenario of a decline in the pound in the second half of the day, the bulls should show themselves in the area of 1.4078, which they did not reach yesterday. The formation of a false breakout forms an excellent entry point into the continuation of the upward trend. If buyers do not show activity, the pressure on the pound may return, and the bears will continue to build a new downward channel. In this case, I do not recommend rushing to buy: the optimal scenario will be long positions for a rebound from a large minimum of 1.4009, based on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need to:
In the first half of the day, we fell quite a bit short of the resistance I indicated at 1.4147, and now the focus of the bears should shift to the resistance at 1.4143. The formation of a false breakout will be a signal to open short positions to continue the downward trend formed yesterday. There are also moving averages that play on the side of sellers. If the US labor market data turns out to be much better than economists' forecasts, we can expect a more significant decline in the pair to the support area of 1.4078. A break and a test of this area from the bottom up will form an additional entry point into short positions, which will collapse GBP/USD already in the area of the minimum of 1.4009, where I recommend taking the profits. In the scenario of the pound rising in the second half of the day above the resistance of 1.4143 and the absence of any bear reaction during the retest, it is best not to rush to sell. I advise you to postpone short positions until the maximum is updated in the area of 1.4201, from which you can open short positions immediately for a rebound in the expectation of a downward correction of 20-25 points within the day.
Let me remind you that the COT reports (Commitment of Traders) for May 11 recorded an increase in both long and short positions. All this happened against the background of a small downward correction of the pair, which was completely recouped after good indicators on the UK economy's contraction rate in the 1st quarter of this year. The growth last month also gave investors hope that the British pound will continue to gain strength. As early as early summer, almost all quarantine restrictions will be lifted in the UK. Given the excellent rate of vaccination against coronavirus, we can assume a sharp recovery in GDP in the 2nd quarter of 2021, which will be the highest in the history of this indicator. Such news strengthens investors' confidence in the British pound and its prospects. The COT report shows that long non-profit positions have grown from 52,262 to the level of 64,947. At the same time, short non-profit positions rose from 32,414 to 36,771, bringing the non-profit net position to 28,176 from 19,848 a week earlier. Last week's closing price also jumped significantly to 1.41308, against 1.39033.
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
A break of the upper limit of the indicator in the area of 1.4143 will lead to a new wave of growth of the pound. A break of the lower limit in the area of 1.4091 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 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.
