In my morning forecast, I paid attention to the 1.2696 level and planned to make decisions on entering the market from it. Let's look at the 5-minute chart and figure out what happened there. The growth and formation of a false breakdown there led to a sell signal, which resulted in a drop in the pair by more than 30 points. In the afternoon, the technical picture was slightly revised.
To open long positions on GBP/USD, you need:
During the European session, speeches by representatives of the Bank of England had a positive impact on the British pound, returning it to growth, but it was not possible to get beyond the side channel. We have quite interesting statistics ahead on the indicator of consumer confidence in the United States, the decline of which will weaken the dollar's position again, which will lead to a sharp upward jerk of GBP/USD. Data on changes in the volume of orders for durable goods and the housing price index are unlikely to have a significant impact on volatility. Strong U.S. data will lead to a pound decline and an update of the nearest support at 1.2666, where the moving averages are slightly above, playing in favor of buyers. Only the formation of a false breakout at this level will provide a suitable entry point for long positions with the target of restoring the pair to around 1.2696. A breakout and consolidation above this range will revive demand for the pound and open the way to 1.2730, strengthening buyers' positions for the formation of a new bullish trend. The ultimate target will be the maximum at 1.2769, where I plan to make a profit. In the scenario of the pair's decline and the lack of bullish activity at 1.2666, the pound may face another sell-off. In this case, only a false breakout around the next support at 1.2639 will confirm the correct entry point. I plan to buy GBP/USD immediately on the rebound from the minimum of 1.2612 with the target of a 30-35 point correction within the day.
To open short positions on GBP/USD, the following is required:
Sellers performed well in the first half of the day. In case of further pair growth, I plan to act only after the formation of a false breakout around the new resistance at 1.2696, similar to what I discussed earlier. This will lead to the opening of short positions with the target of a slight decline in the pair towards 1.2666 – support formed by the end of yesterday, where the moving averages are slightly above, playing in favor of bulls. A breakout and a bottom-up reverse test of this range will deal another blow to bullish positions, leading to the removal of stop orders and opening the way to 1.2639, where I expect the appearance of major buyers. The ultimate target will be the area around 1.2612, where profits will be taken. In the scenario of GBP/USD growth and the absence of activity at 1.2696 in the second half of the day, buyers will continue the upward trend. In this case, I will postpone sales until a false breakout at the level of 1.2730. If there is no downward movement, I will sell GBP/USD immediately on the rebound from 1.2769, but only expecting a pair correction down by 30-35 points within the day.
In the COT (Commitment of Traders) report for February 20th, there was an increase in short positions and a reduction in long ones. The recent statements by Bank of England representatives that rates may be lowered even if inflation does not reach the targeted 2.0% are not clearly reflected in this report, so serious attention should not be paid to it. But even despite this, the pound continues to rise, although, as recent data shows, it may end at any moment — especially given the tough position the U.S. Federal Reserve is currently taking. In the latest COT report, it is mentioned that long non-commercial positions decreased by 2,934 to the level of 87,602, while short non-commercial positions increased by 1,217 to the level of 41,290. As a result, the spread between long and short positions decreased by 2,351.
Indicator signals:
Moving averages:
Trading is above the 30 and 50-day moving averages, indicating an attempt by the pound to rise.
Note: The author considers the period and prices of moving averages on the hourly chart (H1) and they differ from the general definition of classical daily moving averages on the daily chart (D1).
Bollinger Bands:
In case of a decline, the lower boundary of the indicator around 1.2666 will act as support.
Indicator descriptions:
- Moving Average (MA) determines the current trend by smoothing volatility and noise. Period – 50. Marked on the chart in yellow.
- Moving Average (MA) determines the current trend by smoothing volatility and noise. Period – 30. Marked on the chart in green.
- Moving Average Convergence/Divergence (MACD) indicator. Fast EMA – period 12. Slow EMA – period 26. SMA – period 9.
- Bollinger Bands. Period – 20.
- Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting 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 positions of non-commercial traders.
- The total non-commercial net position is the difference between the short and long positions of non-commercial traders.
