Last Friday, there was only one entry point. Let's look at the 5-minute chart and figure out what actually happened. In the morning article, I turned your attention to 1.2057 and recommended making decisions with this level in focus. As expected, bulls managed to push the pair above 1.2057 amid the lack of economic reports. However, there was no clear signal as trading was carried out either above or below 1.2057. In the afternoon, a false breakout of 1.2057 took place. It created an excellent buy signal. However, there was no large upward movement.
When to open long positions on GBP/USD:
Market volatility as well as trading volumes are likely to be rather low today because of the Christmas holidays. There will hardly be good entry points. For this reason, it is better to be cautious when making trading decisions. It would be wise to open long positions only if a false breakout of 1.2037 takes place. At this level, the moving averages are benefiting bulls. The pair could return to 1.2090, which acts as the resistance level that appeared last Friday. A breakout above this level and the lack of UK data may push the pair to 1.2142 where the sellers will enter the market. A breakout above 1.2142 with a similar downward retest will help the pair to approach 1.2183 where I recommend locking in profits. If the pair fails to reach 1.2037, I would advise you to postpone long positions until a false breakout of a weekly low of 1.1994 takes place. You could buy GBP/USD immediately at a bounce from 1.1949, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on GBP/USD:
Sellers are likely to step aside. They will hardly try to push the pair below the monthly low at the end of this year. In the current situation, only a false breakout of the resistance level of 1.2090 will give a good sell signal. If so, the bears will assert strength. The pair may decline to a low of 1.2037. Only a breakout and an upward retest of this level will provide a sell signal with the prospect of a decrease to 1.1994. A more distant target will be the 1.1949 level where I recommend locking in profits. If GBP/USD rises and bears show no energy at 1.2090, the pressure on the pound will weaken significantly at the start of the week. The bulls will get an excellent opportunity to start a correction. In this case, only a false breakout of 1.2142 will give an entry point into short positions. If bears show no activity there, you could sell GBP/USD immediately at the bounce from a high and 1.2183, keeping in mind a downward intraday correction of 30-35 pips.
COT report
The COT report for December 13th logged a rise in long and short positions. Given that the number of long positions is higher, it means that the bullish sentiment is strong now. Traders are ready to buy the pair at the current highs. Last week, the Bank of England announced that it would remain committed to aggressive tightening to curb stubbornly high inflation, which slowed down a bit last month. However, many analysts warn that the regulator's decision to stick to a hawkish stance may trigger a recession. It is sure to limit the pair's upside potential. For this reason, it is better to wait for a downward correction in order to buy the instrument. According to the latest COT report, short non-commercial positions rose by 1,015 to 57,747 and long non-commercial positions grew by 3,469 to 32,008. Consequently, the non-commercial net position came in at -25,739 versus -28,193 a week ago. The weekly closing price of GBP/USD increased to 1.2377 versus 1.2149.
Indicators' signals:
Trading is carried out near the 30 and 50 daily moving averages. It indicates that the pair is moving sideways.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
If GBP/USD rises, the indicator's upper border at 1.2090 will serve as resistance.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked green on the chart.
- MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial 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.
