To open long positions on GBP/USD, you need:
In my morning forecast, I paid attention to the 1.3288 level and recommended entering the market from it. Let's look at the 5-minute chart and figure out what happened. The pound's downward movement after the data on the manufacturing sector, which turned out to be worse than economists' forecasts, led to a decline in the pound and the formation of a false breakdown in the area of 1.3288. A buy signal was immediately formed, after which the pair returned to the morning highs in the area of 1.3331, allowing it to pull about 40 points from the market. From a technical point of view, nothing has changed for the second half of the day.
In the afternoon, we are waiting for several statistics on the US labor market, as well as the ISM manufacturing index will be released – the growth of indicators will lead to the strengthening of the US dollar. No less interesting will be the speeches of Chairman of the Fed Board of Governors Jerome Powell and Finance Minister Janet Yellen. Most likely, they will repeat everything they said yesterday, but some details of their plans may be revealed, which will further strengthen the euro's position against the dollar. Let me remind you that the Fed plans to more actively take up the reduction of measures to support the economy already during the December meeting to curb serious inflationary pressure in the country. Also in the afternoon, we are waiting for a speech by the governor of the Bank of England, Andrew Bailey, who continues to adhere to a soft monetary policy - this does not allow the pound to spread its wings. To continue the growth of GBP/USD, more drastic statements from politicians are needed. Only a breakout of 1.3331 and a test of this level from top to bottom will lead to the formation of a buy signal with the prospect of stopping yesterday's bearish momentum and restoring GBP/USD to the area of 1.3362, which remains the upper limit of the side channel. If the bulls do not stop and quickly deal with this level, the next target will be a maximum of 1.3389, where I recommend fixing the profits. The resistance of 1.3417 remains a longer-range target. In the scenario of a decline in the pound during the US session, after a strong report on the UK manufacturing sector, I advise you to open new long positions only after protecting the lower border of the 1.3288 side channel, which buyers coped with perfectly well today in the morning. In the formation of a false breakdown, there will be an entry point into the market. I advise you to open long positions immediately for a rebound only from the minimum of 1.3254, or even lower - around 1.3224, counting on a correction of 20-25 points within a day.
To open short positions on GBP/USD, you need:
The bears attempted today to continue yesterday's momentum but failed to break below 1.3288. So far, sellers should not panic, and all that is required of them in the second half of the day is the protection of resistance 1.3331. The formation of a false breakdown at this level will lead to the formation of a new entry point into short positions, followed by a return to the lower boundary of the 1.3288 side channel, which, as we have already seen in the morning, is very important from a technical point of view. Another breakdown of this level will create real problems for buyers. The reverse test of 1.3288 from the bottom up will give an excellent entry point into the market, which will push the pair to new lows: 1.3254 and 1.3224, where I recommend fixing the profits. The support of 1.3196 will be a more distant target. In case of GBP/USD growth during the US session and weak sellers' activity at 1.3331, it is best to postpone sales to a larger resistance of 1.3362, which also acts as the upper boundary of the side channel. I also advise you to open short positions there only in case of a false breakdown. It is possible to sell GBP/USD immediately for a rebound only from a large resistance of 1.3389, or even higher - from a new maximum in the area of 1.3417, counting on the pair's rebound down by 20-25 points inside the day.
The COT reports (Commitment of Traders) for November 23 recorded an increase in short positions and a reduction in long ones, which led to an even greater increase in the negative delta. Dovish statements by the governor of the Bank of England last week kept the pressure on the British pound even amid risks associated with higher inflationary pressures than previously expected. The aggravation of the situation with coronavirus and the new strain of Omicron in the European part of the continent did not add to optimism. It is also unclear what is with the question about the Server Ireland protocol, which the UK authorities plan to suspend. 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-profit positions decreased from the level of 50,443 to the level of 50,122, while short non-profit positions increased from the level of 82,042 to the level of 84,701. This led to an increase in the negative non-commercial net position: the delta was -34,579 against -31,599 a week earlier. The weekly closing price decreased not so significantly - from 1.3410 to 1.3397.
Signals of indicators:
Trading is conducted around 30 and 50 daily moving averages, which indicates some market confusion with the further direction of the pair.
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.
In case of a decline in the pair, the lower limit of the indicator in the area of 1.3254 will act as support. A breakthrough of the upper limit of the indicator in the area of 1.3335 will lead to a new wave of growth of 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 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.