In my morning article, I turned your attention to 1.2423 and recommended making decisions with this level in focus. Now, let's look at the 5-minute chart and figure out what actually happened. A decline and a false breakout of this level gave an excellent buy signal within the correction. At the time of writing this article, the pair climbed by more than 30 pips. For the afternoon, the technical outlook remained the same.
When to open long positions on GBP/USD:
Given that bulls managed to push the pair higher after a decline, an upward correction may persist. The pair could even reach the highs of last Friday. This scenario could take place if the comments of Fed policymakers today are neutral. Today, many Fed officials are scheduled to deliver speeches. So, it would be wise to hold long positions in the morning. However, I would advise you to open new ones only after a drop and a false breakout of a low of 1.2423. It will generate a buy signal and lead to a jump to 1.2469. At this level, bears could try to regain control. A breakout and a downward retest of 1.2469 will provide a buy signal and boost bullish sentiment. The pair is likely to approach 1.2507. A more distant target will be the 1.2542 level where I recommend locking in profit.
If it falls to 1.2423 and bulls fail to protect this level, it is better to postpone long positions until a false breakout of a monthly low of 1.2392. You could buy GBP/USD at a bounce from 1.2353, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on GBP/USD:
Sellers tried to take the upper hand in the morning. However, the pair rebounded from the lows. As a result, the upward correction continued. Now, it would be extremely favorable to go short after a false breakout of 1.2469. This is the resistance level formed last Friday. The target will be the support level of 1.2423. A breakout and an upward retest of this level will increase the pressure on the pair, providing a sell signal/ The pair is likely to drop to 1.2392. A more distant target level will be the low of 1.2353 where I recommend locking in profits.
If GBP/USD rises and bears fail to protect 1.2469, which is likely, I would advise you to postpone short positions until the test of the resistance level of 1.2507. Hawkish comments from the Fed policymakers and a false breakout will give entry points into short positions. If there is no downward movement there, you could sell GBP/USD at a bounce from 1.2542, keeping in mind a downward intraday correction of 30-35 pips.
COT report
According to the COT report for May 9, there was an increase in both long and short positions. Although the report does not include the changes that occurred after the Bank of England's decision to raise interest rates, a steady rise in long positions proves the presence of large traders who are willing to buy the pound sterling even at current levels. Given a noticeable correction at the end of last week, the pound sterling may grow higher. The latest COT report showed that short positions of the non-commercial group of traders grew by 12,900 to 71,561, while long positions jumped to 9,437. This led to an increase in the non-commercial net position to 4,528 against 1,065 recorded a week earlier. The pair resumed growth after a slight decline. It is likely to have a positive impact on the pound sterling in the future. The weekly closing price rose to 1.2635 against 1.2481.
Indicators' signals:
Trading is carried out above the 30 and 50 daily moving averages, which indicates the continuation of an upward correction.
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 GPB/USD declines, the indicator's lower border at 1.2423 will serve as support.
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.
