To open long positions on GBP/USD, you need:
In my morning forecast, I paid attention to the level of 1.3536 and recommended making decisions on entering the market. Let's look at the 5-minute chart and figure out what happened. The growth and the formation of a false breakdown at this level in the first half of the day led to the formation of a signal for the pound to break, but it was not possible to achieve a larger downward correction. As a result, losses were recorded on the deal and the pound continued its upward correction against the US dollar before tomorrow's meeting of the Bank of England on monetary policy. And what were the entry points for the euro this morning?
During the US session, we are waiting for data on the US labor market, which may put even more pressure on the US dollar, as a sharp slowdown in the growth of new jobs in the private sector is expected in January this year compared to December last year.
The primary task of buyers of the pound in the afternoon is to protect the support of 1.3527 formed during morning trading. By forming a false breakdown there, buyers will prove their presence in the market to continue the bull market. An equally important task will be the breakdown of 1.3562, which the bulls are now targeting and which, at the time of writing, only a few points remain before the test. A breakout and a test of this level from top to bottom will give an additional entry point to return to 1.3599. A more difficult task will be to update the 1.3656 area, but this is closer to the time when interest rates are raised by the Bank of England. I recommend fixing profits there.
In the scenario of a decline in GBP/USD during the US session and a lack of activity at 1.3527, it is better not to rush into buying risky assets. With strong data from ADP on the US private sector, I advise you to wait for the update of the 1.3495 level, where the moving averages are playing on the side of the bulls. You can buy the pound immediately on a rebound from 1.3455, or even lower - from a minimum of 1.3407, counting on a correction of 20-25 points within the day.
To open short positions on GBP/USD, you need:
Sellers are not in a hurry to enter the market and actively press the pound. The sharp jump in inflation in the eurozone probably reminded traders that not everything is so simple with this indicator in the UK. Having missed the morning resistance, the primary task of the bears is now to protect 1.3562. Only the formation of a false breakdown at this level, by analogy with what I discussed above, plus strong statistics on the number of employed from ADP - all this forms an entry point into short positions, followed by a decline in the pair to the area of 1.3527. A breakdown and a test of this area from the bottom up will give an additional entry point into short positions in the expectation of a decline in GBP/USD by 1.3495 and 1.3455, where I recommend fixing the profits.
If the pair grows during the American session and sellers are weak at 1.3562, and bulls may continue to gain long positions before tomorrow's meeting of the Bank of England, it is best to postpone sales until the next major resistance at 1.3599. I also advise you to open short positions there only in case of a false breakdown. You can sell GBP/USD immediately for a rebound from 1.3656, counting on the pair's rebound down by 20-25 points within a day.
The COT reports (Commitment of Traders) for January 25 recorded an increase in short positions and a sharp reduction in long ones. All this has led to a return of the market to the sellers' side, but this week the situation may change dramatically. As the bears did not try to continue the downward trend, it turned out quite badly. The sellers were not helped by the statements of the Federal Reserve System after the monetary policy meeting that the regulator would start raising interest rates in the United States in March. Most likely, the demand for the pound will gradually recover, as a meeting of the Bank of England committee will be held this Thursday, at which it will be decided to raise interest rates. However, the pressure on the pound will remain due to the observed fundamental pattern, which creates several more serious moments limiting the upward potential. However, if you look at the overall picture, the prospects for the British pound look pretty good, and the observed downward correction makes it more attractive. In any case, the Bank of England's decision to raise interest rates further this year will push the pound to new highs. The COT report for January 25 indicated that long non-commercial positions decreased from the level of 39,760 to the level of 36,666, while short non-commercial positions increased from the level of 40,007 to the level of 44,429. This led to a fall in the negative non-commercial net position from -247 to -7,763. The weekly closing price dropped from the level of 1.3647 to the level of 1.3488.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 daily moving averages, which indicates the continued growth of the pound.
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 the case of a decline, the lower limit of the indicator around 1.3495 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.
