Yesterday there were several signals to enter the market. Let's take a look at the 5-minute chart and figure out what happened. Earlier, I asked you to pay attention to 1.2027 to decide when to enter the market. A breakout and a retest upwards to 1.2027 in the morning, after the weak PMI data, produced a buy signal, and resulted in a regular sell off. As a result, the pair went down about 30 pips, but failed to test the nearest support at 1.1986. In the afternoon, after a strong report from ADP, the pound plummeted, but we failed to get good sell signals. Buying on a rebound from 1.1904 did not bring the expected result.
When to open long positions on GBP/USD:
This morning, I advise you to pay attention to the UK construction PMI. The pound has already dropped due to yesterday's services PMI, and the same thing could happen if today's report turns out to be disappointing. However, the US labor market that will be released in the afternoon is much more important. I will speak about this more in the forecast for the US session. In the current situation, bulls can only hope to protect the nearest support at 1.1881, which was achieved yesterday. A false breakout there will produce a buy signal and will make it possible for us to find the lower limit of the correction channel, possibly returning to the resistance at 1.1932. Once the pound settles in this level, which can only happen if we receive strong UK data, we can finally expect a sharper rally and an update of 1.1982. At this level, the moving averages are benefiting the bears. A breakout above 1.1982 with a similar test will open up the growth prospects at 1.2033, where I recommend locking in profit. If the pair fails to reach 1.1881, the pressure on the pair will increase, and this will affect the bulls' stop orders, and the update of the next low. For this reason I wouldn't rush to buy: it would be wise to open longs on a decline and a false breakout near the low at 1.1829. It is also possible to buy the asset on the rebound from 1.1781, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on GBP/USD:
The bears were quick to take advantage of yesterday's good US data and intend to do the same thing today. Their task is to protect the Asian session's resistance at 1.1932. As long as the pair is trading below this range, bears have a good chance of hitting a new low this year. A false breakout, around 1.1932, after a weak construction PMI, is a good sell signal, this will give hope for a bearish movement and a new fall to 1.1881. A breakout and an upward test of 1.1881 will produce a sell signal with the prospect of movement to 1.1829 and the possibility of reaching 1.1781, where I recommend locking in profit. If GBP rises and bears are not active at 1.1932, nothing bad will happen, but the pressure on the pound will weaken. In that case, only a false breakout around 1.1982 will provide an entry point into short positions, with the goal of moving down. If bears are not active there either, you could sell GBP/USD right from the highs and 1.2033, keeping in mind a downward intraday correction of 30-35 pips.
COT report:
The COT report for December 20 logged a rise in long positions and a fall in short ones. After the key meetings of central banks, including the Bank of England, it became clear: central banks are going to continue to raise interest rates and tighten monetary policy, which by all rules, should lead to demand for national currencies, including the British pound. However, given that the UK's Q3 GDP data was revised downwards, and the onset of recession is not an expectation but a reality for next year, it is unlikely that traders will continue to buy the pound with the same fervor in January. According to the latest COT report, short non-commercial positions were down 16,860, to 40,887, while long non-commercials were up 3,276, to 35,284. Consequently, the non-commercial net position came down to -5,603 from -25,739 a week ago. The weekly closing price of GBP/USD was down to 1.2177 versus 1.2377.
Indicators' signals:
Trading is carried out below the 30 and 50 daily moving averages. It indicates the possibility of a bear market.
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 limit at 1.1982 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.
