To open long positions on GBP/USD, you need:
In my morning forecast, I paid attention to the level of 1.3372 and recommended making decisions on entering the market. Let's take a look at the 5-minute chart and figure out the entry point. The breakout and consolidation above this level, which took place in the first half of the day, followed by a reverse test from top to bottom, led to the formation of a signal to buy the pound in continuation of the uptrend observed throughout yesterday. As a result, at the time of writing, the bulls are already testing the strength of the 1.3407 level, preparing for a breakthrough at 1.3446. The technical picture has changed a bit, but the strategy for the afternoon remained the same. And what were the entry points for the euro this morning?
Now the whole focus is shifted to the level of 1.3407 and the behavior of the pound there. The release of US data is scheduled for the US session, which may please traders, which will lead to a backlash against the strengthening of the US dollar against the pound. However, if we take yesterday as an example, we will see that strong statistics did not help the dollar much, so it is best to rely on technical signals. I recommend paying attention to the data on changes in the level of spending and income of Americans, as well as the weekly number of initial applications for unemployment benefits in the United States. Only a breakdown and a reverse test of the 1.3407 level from top to bottom, by analogy with a purchase at 1.3372, will lead to the formation of a signal to open long positions in the continuation of the bull market with the prospect of updating 1.3446. Weak data on US GDP will only increase the appetite for risks, so in the event of a breakthrough and a reverse test of 1.3446, you can continue to buy the pound in order to update the maximum of 1.3472, where I recommend fixing the profits. In the scenario of a decline in the pound during the American session, buyers will re-emphasize the protection of the 1.3372 support. Only by the formation of a false breakdown will there be a signal to buy GBP/USD. If there are no bulls there, it is possible to open long positions immediately for a rebound at the minimum of 1.3331, where the moving averages playing on the side of the bulls are, or even lower - from 1.3301, counting on a correction of 20-25 points inside the day.
To open short positions on GBP/USD, you need:
The bears once again failed to cope with the task assigned to them, and now it is necessary to think about how to protect the level of 1.3407. Only the formation of a false breakdown there will lead to a signal to open short positions against the observed bull market, and strong data on the American economy, especially on the growth of spending and income of Americans, can strengthen demand for the dollar, which will push the pair to support 1.3372. A breakout and a reverse test of this level from the bottom up will give an additional entry point for the sale of the pound with a promising correction of the pair to 1.3331, where I recommend fixing the profits. A longer-range target will be a minimum of 1.3301, but this is something out of a series of fiction, with such a bull market. In case of further growth of GBP/USD during the US session and lack of activity at 1.3407, as well as weak data on the US economy, I recommend postponing sales to a larger resistance of 1.3446, or selling even higher - from 1.3472, counting on the pair's rebound down by 20-25 points within the day.
The COT reports (Commitment of Traders) for December 14 recorded a reduction in both short and long positions. Considering that long positions were reduced by almost half, this led to serious changes in the negative delta. However, it is worth noting that these data do not take into account the results of the meeting of the Federal Reserve System and the Bank of England. But if you look at the big picture in general, the prospects for the British pound look rather sad. After the Bank of England's decision to raise interest rates, the pair shot up, but the very next day it underwent a hard sell-off, which unsettled many market participants hoping for the end of the bearish trend. The US dollar is likely to continue to be in demand amid uncertainty with the new strain of coronavirus Omicron, which is spreading at a fairly rapid pace, scaring market participants from active actions: no one wants to buy an overbought dollar, but the cheap pound is also not a very attractive tool yet. Until the situation with the next wave of coronavirus returns to normal, it will be quite problematic to talk about the growth of the pound. However, high inflation remains the main reason why the Bank of England will continue to raise interest rates next year, which will support the British pound. The COT report for December 14 indicated that long non-commercial positions fell from the level of 48,950 to the level of 29,497, while short non-commercial positions fell from the level of 87,227 to the level of 80,245. This led to an increase in the negative non-commercial net position from 38,277 to -50,748. The weekly closing price sank from 1.3262 to 1.3213.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 daily moving averages, which indicates further building of an upward 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
In case of a decline in the pair, the average border of the indicator around 1.3331 will act as support.
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.
