To open long positions on GBP/USD, you need:
Several excellent signals to enter the market were formed yesterday. Let's take a look at the 5 minute chart and understand the entry points. In my morning forecast, I paid attention to the 1.3236 level and advised you to make decisions on entering the market. During the European session, there was a breakthrough and consolidation below the level of 1.3236. The test of this area from the bottom up and the bulls' unsuccessful attempt to return - all this leads to a signal to sell the pound. However, to my regret, after falling by 15 points, the bears quickly left the market, although there were no objective reasons for this. This pushed the pair to rise and resulted in a complete revision of the pair's technical picture for the second half of the day. After a slight strengthening in GBP/USD, the focus shifted on protecting resistance at 1.3258. Several formations of false breakouts there provided excellent signals to sell GBP/USD, which eventually fell by more than 50 points by the end of the day. What were the signals for the EURUSD pair?
Before examining the technical picture of the pound, let's take a look at what happened in the futures market. The Commitment of Traders (COT) reports for December 7 revealed that both short and long positions decreased. Considering the almost equal reduction of positions, this did not lead to serious changes in the negative delta. Bad data on the UK economy, which came out at the end of last week, clearly spoiled the mood of the buyers of risky assets, counting on an upward correction in the pair ahead of the Bank of England meeting. This week, BoE Governor Andrew Bailey will share his stance on the future of monetary policy. If it continues to be dovish in nature, most likely the pressure on the pound will only grow, as the representatives of the Federal Reserve, on the contrary, are going to curtail stimulus measures, which should support the US dollar. High inflation continues to be the main reason why the BoE may change its mind with the preservation of stimulus measures, however, uncertainty will remain until the results of the meeting on December 16 are announced. An equally serious problem for the UK is the new Omicron coronavirus strain, which could lead to another lockdown and the country's quarantine. So far, the authorities have to closely monitor the development of the situation with the new strain, which negatively affects the economy at the end of this year. The December 7 COT report indicated that long non-commercial positions declined from 52,099 to 48,950, while short non-commercials dropped from 90,998 to 87,227. This kept the negative non-commercial net position almost unchanged. : -38,277 versus -38,899 a week earlier. The weekly closing price dipped slightly from 1.3314 to 1.3262.
Today we have a series of data on the state of the UK labor market, which may determine the pound's direction in the first half of the day. The bulls' main task is to regain control over the resistance at 1.3219, since without it it will be difficult to imagine the pair's succeeding growth. There are moving averages that play on the bears' side above this level. The release of good statistics on the change in the number of applications for unemployment benefits in the UK and the reduction in the unemployment rate will certainly support the pound. A breakthrough and test of 1.3219 from top to bottom forms a new entry point for buying the pound with the prospect of stopping the bearish trend and GBP/USD recovery to the 1.3255 area. A breakthrough of this range will open a direct opportunity to renew the high at 1.3286, and the next target will be the 1.3317 level, where I recommend taking profits. In case the pound falls during the European session, an important task is to protect support at 1.3187, which is the bulls last hope to protect their positions. Forming a false breakout there will lead to a buy signal. I advise you to open long positions in GBP/USD immediately on a rebound from a low like 1.3153, or even lower - around 1.3111, counting on a correction of 20-25 points within the day.
To open short positions on GBP/USD, you need:
The bears are in control of the market and the fact that the pair fell for no reason yesterday is proof of that. The optimal scenario for today is for a false breakout to form at the level of 1.3219, slightly above which the moving averages pass. A disappointing report on the UK labor market will lead to forming the first entry point to short positions with the prospect of a decline to the area of the lower border of the horizontal channel at 1.3187, on which a breakthrough depends. Regaining control of this level will create real problems for the bulls and will return the downward trend to the pair. A reverse test of 1.3187 from the bottom up will provide an excellent entry point into short positions, which will push GBP/USD to the lows of 1.3153 and 1.3111, where I recommend taking profits. In case the pair grows during the European session and the bears are weak at 1.3219, it is best to postpone selling until the larger resistance at 1.3255. I also recommend opening short positions there only in case of a false breakout. Selling GBP/USD immediately on a rebound is possible only from a large resistance at 1.3286, or even higher - from a new high in the 1.3317 area, counting on the pair's rebound down by 20-25 points within the day.
Indicator signals:
Trading is carried out below 30 and 50 moving averages, which indicates an attempt by the bears to continue the downward trend.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
A breakthrough of the lower border of the indicator in the area of 1.3180 will increase the pressure on the pair. In case of growth, the upper border of the indicator at 1.3260 will act as a resistance.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
- MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial 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 short and long positions of non-commercial traders.
