To open long positions on GBP/USD, you need:
The first half of the day passed quite calmly for the British pound. A good signal was formed to open short positions. They offer to look at the 5-minute chart and figure out the entry point. In my morning forecast, I paid attention to the resistance of 1.3386 and gave several scenarios on how to act. An unsuccessful attempt to consolidate higher and a false breakdown in the area of 1.3386 led to the formation of a sell signal for the pound, after which it collapsed by 40 points. From a technical point of view, nothing has changed, as, in fact, the strategy for the afternoon.
A lot will depend on the key indicators of US GDP for the 3rd quarter of this year, as well as on the minutes of the Federal Reserve System from its last meeting. Good indicators of economic growth rates will certainly increase demand for the euro, and the hawkish view of Fed policymakers on monetary policy will certainly contribute to the pound updating new lows. However, buyers still have the opportunity to return the market under their control. To do this, it is necessary to protect the support of 1.3344, to which the pair is now heading. In the formation of a false breakdown, there will be the first signal to open long positions to return to the resistance of 1.3386. Moving averages pass at this level, so it will not be so easy to get out of this range. A breakdown and a test of this area from top to bottom will open the way to a maximum of 1.3446, which will be the first signal to build an upward correction for the pound. A more distant target will be the 1.3494 level, where I recommend fixing the profits. Major growth of the pair may take place in the afternoon after the release of the US GDP report and the publication of the minutes of the Federal Reserve meeting. Under the scenario of a decline in the pair during the American session and the absence of bull activity at 1.3344, the pressure on the pound may seriously increase. In this case, I advise you to open new long positions only after a false breakdown in the area of 1.3308. You can watch GBP/USD purchases immediately for a rebound from the minimum of 1.3254, or even lower - from the support of 1.3193, counting on a correction of 25-30 points within a day.
To open short positions on GBP/USD, you need:
Bears are still keeping the market under their control and counting on strong macroeconomic statistics on the American economy. The best option for selling GBP/USD in the current conditions remains the formation of a false breakdown at the level of 1.3386, by analogy with what I discussed above. This will lead to the formation of a new entry point into short positions with the same goal of reducing to the area of 1.3344, on which a lot depends today. The breakout of this range together with the reverse test from the bottom up - all this forms an additional signal to open new short positions to reduce to the lows: 1.3308 and 1.3254, where I recommend fixing the profits. The 1.3193 area will be a more distant target, but its test will be possible in the case of strong US GDP data and hawkish marks in the Federal Reserve minutes. If the pair grows during the American session and there are no sellers at the level of 1.3386, it is best to postpone sales to a larger resistance of 1.3446. I advise you to open short positions immediately for a rebound from 1.3494, or even higher - from a new maximum in the area of 1.3560, counting on the pair's rebound down by 20-25 points inside the day.
The COT reports (Commitment of Traders) for November 16 recorded a sharp increase in short positions and a reduction in long ones, which led to an increase in the negative delta. Good data on the recovery of the UK labor market increased inflationary pressure, and growth in retail sales - all this saved the British pound last week and gave the bulls a chance to continue the pair's growth. However, the aggravation of the situation with coronavirus in the European part of the continent and statements by representatives of the Bank of England that no one will rush to change the course of monetary policy in the current conditions - all this very quickly returned pressure on the pair by the end of the week. An important point remains the unresolved issue around the Server Ireland protocol, which the UK authorities plan to suspend in the near future. To this, the European Union is preparing to introduce certain retaliatory measures – which do not add confidence to buyers of the British pound. At the same time, in the United States of America, we are witnessing an increase in inflation and increased talk about the need for an earlier increase in interest rates next year, which provides significant support to the US dollar. However, I recommend sticking to the strategy of buying the pair in case of very large falls, which will occur against the background of uncertainty in the policy of the central bank. The COT report indicates that long non-commercial positions decreased from the level of 54,004 to the level of 50,443, while short non-commercial positions increased from the level of 66,097 to the level of 82,042. This led to an increase in the negative non-commercial net position: the delta was -31,599 versus -12,093 a week earlier. The weekly closing price collapsed as a result of the Bank of England's policy from 1.3563 to 1.3410.
Signals of indicators:
Moving averages
Trading is conducted below 30 and 50 daily moving averages, which indicates the continuation of the downward trend.
Note: The period and prices of 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 lower limit of the indicator in the area of 1.3355 will increase the pressure on the pair. A break of the upper limit of the indicator in the area of 1.3386 will lead to the growth of the pair.
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.
