To open long positions on GBP/USD, you need:
In my morning forecast, I paid attention to the level of 1.3417 and recommended making decisions on entering the market. Let's take a look at the 5-minute chart and figure out the entry point. An unsuccessful breakout of this range led to the formation of an excellent signal to open short positions. As a result, the pound sank by 20 points, to the support area of 1.3389, which was not enough before the test. For this reason, it was not possible to get a good entry point there already in purchases. From a technical point of view, nothing has changed at all for the second half of the day. And what were the entry points for the euro this morning?
There are also no fundamental statistics for the UK and the US in the afternoon, and many markets will continue to be closed after Christmas or will work for a shortened session. The primary task of the pound buyers for today remains to protect the support of 1.3389. This level is very important, as its breakdown can force traders to take profits at the end of the year, which will form a more powerful fall in the pound. Only the formation of a false breakdown at 1.3389 will lead to the formation of a buy signal for GBP/USD with the prospect of continuing the bull market aimed at breaking resistance 1.3417, formed based on the results of last Friday. A breakdown and a test of this level from top to bottom will give an additional entry point and strengthen the position of buyers to build a new bullish trend and update the highs of 1.3445 and 1.3472. In the scenario of a decline in the pound during the US session and the lack of activity at 1.3389, and the growth after a false breakdown should be quite rapid, it is best to postpone purchases to the level of 1.3368. Only the formation of a false breakdown there will give an entry point to long positions in the hope of maintaining bullish momentum. You can buy GBP/USD immediately for a rebound in the area of 1.3344, or even lower - from the minimum of 1.3322, counting on a correction of 20-25 points within a day.
To open short positions on GBP/USD, you need:
The bears coped with the morning task perfectly, defending the resistance of 1.3417. The next formation of a false breakdown there in the afternoon, by analogy with what I discussed above, forms a second entry point into short positions, followed by a decline in the pair to the area of 1.3389, for which we will have to fight hard. A breakdown of 1.3389 and a reverse test from the bottom up will increase pressure on the pound and dump it to the next support of 1.3368. It will not be so easy to break below this level, given the low trading volume and low volatility that is expected today throughout the day. Only the consolidation and the reverse test of 1.3368 from the bottom up will give a new entry point into short positions with the prospect of a decline in the pound by 1.3344, where I recommend fixing the profits. If the pair grows during the American session and sellers are weak at 1.3417, it is best to postpone sales to a larger resistance of 1.3445. 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 from a large resistance of 1.3472, or even higher - from a new maximum in the area of 1.3506, counting on the pair's rebound down by 20-25 points inside 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 a new strain of coronavirus, 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 around 30 and 50 daily moving averages, which indicates the lateral nature of the market.
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 1.3389 will act as support. A breakthrough of the upper limit of the indicator in the area of 1.3417 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.
