In my morning forecast, I paid attention to the level of 1.3114 and recommended in detail what to do if this price is reached. Let's look at the 5-minute chart and figure out how to act. Given that we had a downward trend, all the sellers needed was a false breakdown. This is exactly what happened in the first half of the day, which led to a major sell-off of the pound - by more than 60 points. I also paid attention to the divergence on the MACD indicator and advised buying the pound at a false breakdown of the 1.3070 level after updating the weekly lows. Everything went exactly according to the scenario: a return above 1.3070 led to a buy signal, which is valid at the time of writing. And what were the entry points for the euro this morning?
To open long positions on GBP/USD, you need:
Until the moment when trading is conducted above 1.3070, we can count on the continuation of the strengthening of the pair. The growth is also taking place against the background of the resumption of negotiations between Russia and Ukraine. It depends on their result whether the pound will continue its growth or remain under pressure since the pair has no other objective reasons for an upward correction. More recently, the Governor of the Bank of England, Andrew Bailey, said that officials consider it necessary to soften their language regarding the need for further interest rate hikes this year due to growing uncertainty for the economy. This suggests that the regulator does not intend to openly fight even with the current level of inflation, hoping for its slowdown after the risks of a geopolitical conflict begin to weaken. To continue the growth of GBP/USD, an important task for buyers is to return 1.3114 under control, which could not be done in the first half of the day. Only a breakout and consolidation with a reverse test from top to bottom of this range will lead to an additional buy signal, which will open a direct road to 1.3155. Going beyond this level will happen only with very positive news on negotiations and increased demand for risky assets. Weak data on the consumer confidence indicator in the US may provoke a breakthrough and a reverse test of 1.3155, which will give a buy signal, allowing the bulls to get out to the highs of 1.3187 and 1.3219, where I recommend fixing the profits. In the scenario of a decline in GBP/ USD during the American session, it is best to postpone purchases until the morning support of 1.3069. I also advise you to open long positions there only when forming a false breakdown by analogy with what I discussed above. You can buy GBP/USD immediately on a rebound from 1.3037, or even lower - from a minimum of 1.3003, counting on a correction of 30-35 points within a day.
To open short positions on GBP/USD, you need:
Sellers need to continue to be active, even though they have already coped with the main task of updating the weekly minimum. Only a breakthrough and a reverse test of 1.3069, together with strong data on the US consumer confidence indicator and hawkish statements by the Fed representatives, will lead to the formation of a new signal to sell the pound. In this case, we can count on reaching the low of 1.3037, but the longer-term goal will be the support of 1.3003, to which we can quickly fall in case of failed results of the meeting of representatives of Russia and Ukraine. In the scenario of an upward correction in the afternoon, all that bears need is the protection of 1.3114. The formation of a false breakdown at this level, by analogy with the morning signal that I analyzed above, will lead to another excellent entry point into short positions with the aim of another GBP/USD sell-off. In the absence of an activity scenario at 1.3114, bears may have problems. In this case, I advise you to postpone short positions to 1.3155. I also advise selling there in case of a false breakdown. It is possible to open short positions immediately for a rebound from 1.3187, or even higher - from a maximum of 1.3219, counting on a correction of the pair down by 20-25 points inside the day.
The COT reports (Commitment of Traders) for March 22 recorded a sharp increase in short positions and only a slight strengthening of long ones. Several statements made by representatives of the Federal Reserve System last week returned pressure on the British pound, which is already experiencing quite serious problems with growth due to problems in the economy, which have already led to a decline in the standard of living of households. Experts note that the situation will only worsen, as inflation risks, which mainly negatively affect the economy, are now quite difficult to assess. High energy prices and the geopolitical situation in Ukraine, together with several sanctions from the UK and other countries - all will slow down the economy. The softer position of the governor of the Bank of England this week has already led to another sell-off of the British pound, which is likely to continue due to the lack of good news. The only thing the bulls can count on now is the positive results of the negotiations between the representatives of Russia and Ukraine and progress towards a settlement of the conflict. The COT report for March 22 indicated that long non-commercial positions rose from the level of 32,442 to the level of 32,753, while short non-commercial positions jumped from the level of 61,503 to the level of 69,997. This led to an increase in the negative value of the non-commercial net position from -29,061 to -37,244. The weekly closing price increased from 1.3010 to 1.3169.
Signals of indicators:
Moving averages
Trading is conducted below 30 and 50 daily moving averages, which indicates the bearish 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 the case of growth, the upper limit of the indicator in the area of 1.3110 will act as resistance.
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 use the futures market for speculative purposes and to 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.
