To open long positions in GBP/USD, you need:
In my morning article, I focused on the level of 1.3627 and recommended making decisions to enter the market, taking it into account. Let's observe the 5-minute chart and analyze it. The pound's recovery to the area of 1.3627 in the morning and the formation of a false breakout generated a sell signal. However, after the release of strong UK data the bulls managed to gain control over this level. The reverse top-down test of 1.3627 was the reason why traders had to close short positions at zero profit and turn to buying. However, then a strong upward movement did not take place. The repeated decline of the pair to 1.3627 at the time of writing the article makes the further growth of the trading instrument unlikely. The technical picture for the second part of the day has changed a little. Besides, what were the euro's entry points this morning?
In the second half of the day, very low volatility and low trading volume is expected. The Presidents' Day in the United States is the reason for it. The stock exchanges will be closed due to this holiday. Therefore, this fact will have a significant impact on the trading volume. No US fundamental statistics will be published today. Therefore, I think trading will be carried out within a new sideways channel, while the bulls will try to reach new monthly highs. As long as trading is conducted above 1.3619 (next intermediate support), there are good chances for further growth. In the second half of the day, the bulls' key task will be to protect the support at 1.3619, essential to keep the bullish sentiment, as well as to break the new resistance at 1.3640, formed in the first half of the day. In case of GBP/USD correction during the American session, the best option is buying and a false breakout at 1.3619 with the moving averages slightly below. A breakout and a test at 1.3640, which the buyers are targeting today, as well as top-down update of this range will form an additional buy signal with the pair's further rise to 1.3659. A more distant target is seen at 1.3683 where I recommend profit taking. If the GBP/USD declines during the American session and bulls lack activity at 1.3619, no significant changes will occur. It is advisable to await a test of the next major level at 1.3598. Formation of a false breakout there will provide an entry point into long positions. It is possible to buy the pound immediately for a rebound from the level of 1.3573, lower boundary of the side channel, or even lower from the low of 1.3543, counting on a 20-25 pips correction within the day.
To open short positions on GBP/USD, you need:
Bears have made feeble attempts to return to the market so far even after the pair was close to the February highs. This fact indicates bullish expectations, or a lack of sellers' interest amid geopolitical tensions between Russia and Ukraine. The key task for today is to protect a new resistance at 1.3640. If the pound climbs above this range, the bears will lose ground. A false breakout at 1.3640 will form a good entry point into short positions. Besides, a return of the bear market and the pair's decline to the support area at 1.3619, formed after the European session is likely. It will be difficult to break below this range as there are moving averages favoring the bulls. A breakout and a bottom-up test of 1.3619 will provide an additional entry point to the short positions with the downside targets at 1.3598 and 1.3573. Today's holiday in the US is the reason for low trading volume and the support levels being so close. A more distant target is seen at 1.3543 where I recommend profit taking. If the pair grows during the American session and sellers lack activity at 1.3640, it is advisable to postpone sales. A breakout of this range will hit sellers' stop orders, which may cause a sharp rise in the pound. I recommend selling the GBP/USD pair immediately for a rebound from the level of 1.3683, with the goal of a 20-25 pips intraday correction.
The COT reports from February 8 recorded a significant increase in both short and long positions. The latter were much numerous, which led to a decrease of the negative delta. However, the negative value has remained, indicating that sellers dominate in the market. Notably, this report takes into account the outcome of the Bank of England meeting, where it was decided to raise the interest rates. However, it did not favor the pound much as it is clear that these changes were made to fight high inflation. Considering that the British economy is facing a crisis and the economic growth could slow down at any moment, raising the interest rates has not resulted in the rapid growth of the British pound. Geopolitical tensions between Russia and Ukraine, as well as the Federal Reserve's hawkish view on future interest rates this March exert pressure on pound buyers and are an additional deterrent to the bull market for the GBP/USD pair. Some traders expect that the US central bank may resort to more aggressive policy and raise rates immediately by 0.5% rather than 0.25%. In this case, it will be a bullish signal for the US dollar. According to the COT report, long non-commercial positions rose from 29,597 to 44,709, while short non-commercial positions increased not significantly from 53,202 to 53,254. This led to a sharp decline in the negative non-commercial net position from -23,605 to -8,545. The weekly closing price rose from 1.3444 to 1.3537.
Indicator Signals:
Moving averages.
Trading is conducted above the 30 and 50 day moving averages, indicating that buyers are making attempts to continue the pound's growth.
Note. The period and prices of moving averages are considered by the author on hourly chart H1 and differ from the common definition of classic daily moving averages on daily chart D1.
Bollinger Bands.
In case the GBP/USD pair declines, the lower boundary of the indicator is likely to provide support around 1.3573. In case the pair grows, the upper boundary of the indicator will provide resistance around 1.3640.
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 (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-commercial traders are speculators, such as individual traders, hedge funds and large institutions, which 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.
