To open long positions on GBP/USD, you need:
Yesterday was another great day to trade the British pound. Let's take a look at the 5 minute chart and break down all the trades. You could see that the bulls were forming a false breakout in the support area of 1.3760 at the beginning of the European session, which leads to creating a signal to buy the pound. Even before the release of good data on manufacturing activity in the UK, the pound climbed up at around 35 points, afterwards the growth stalled. The bulls were confident when this range was retested, afterwards the pair still tested the resistance of 1.3805. A breakthrough and consolidation at this level in the afternoon with a reverse test from top to bottom had created another excellent entry point (it was when such a scenario was formed that I advised you to open long positions). We reached the target value of 1.3846 in today's Asian session, which brought about another 30 points in profit.
Today is Good Friday in the EU and many European markets are closed. Therefore, volatility and trading volume in the first half of the day will be at a fairly low level. In this regard, in order to prevent false entry points from appearing, I revised my nearest support and resistance levels. Bulls are faced with the task of surpassing and consolidating above resistance at 1.3863, which, in my opinion, will limit the pair's growth potential in the first half of the day. Being able to settle at this level and its test from top to bottom, by analogy with the long position, which I analyzed above, creates a good entry point into long positions for it to reach a high like 1.3914, where I recommend taking profits. The next major resistance is seen around 1.3956. In case GBP/USD falls during the European session, then bulls will have to think carefully about protecting support at 1.3809, just below which are the moving averages that play on their side. Forming a false breakout there creates a signal for you to enter long positions in hopes that GBP/USD will rise to resistance at 1.3863. If there is a considerably low activity in the support area of 1.3809, then it is best not to rush to buy: the best option would be to open long positions immediately on a rebound from the 1.3760 low, counting on an upward correction of 25-30 points within the day. The next big support is seen at 1.3719.
To open short positions on GBP/USD, you need:
The bears' initial goal is to protect resistance at 1.3863. Forming a false breakout there creates the first signal to open short positions in anticipation of the end of the GBP/USD pair's upward correction at the end of this week. In this case, the nearest target will be support at 1.3808, which sellers missed yesterday afternoon. Moving averages are also slightly lower, so only a breakthrough and being able to test this level from the bottom up can create another signal for you to open new short positions in hopes that GBP/USD will continue to fall to a low in the 1.3760 area, where I recommend taking profits. This scenario will only be realized if there is a more than just good Non-Farm Employment report. If bears are not active at the 1.3863 level, then it is best not to rush to sell, but to wait for a test of the new high at 1.3914, from where you can open short positions immediately on a rebound, counting on a downward correction of 25-30 points within the day.
The Commitment of Traders (COT) report for March 23 showed that long positions decreased while short ones increased. The pound fell due to the strong dollar, as the US is showing reasonably good growth rates after an active vaccination program carried out this winter and the implementation of a $1.9 trillion support plan. But it is worth paying attention to the fact that recent reports on the UK economy have been quite good, which could be the first signal for the pound's bulls, who are counting on an active medium-term growth of the pair this spring. Given that the data in the COT reports are lagging behind, the picture could dramatically change by the end of this week. There is a growing confidence among investors and economists that a recovery in the UK is just around the corner. This is confirmed by the fact that disagreements are growing in the Bank of England over how the economy will develop further and how to react to this. Those who expect to buy the pound should take a closer look at the market. And so, long non-commercial positions fell from 55,190 to 51,843. At the same time, short non-commercial positions increased from 26,590 to 30,024, which indicates the sellers' control over the market. As a result, the non-commercial net position fell to 21,819 from 28,600 weeks earlier. The weekly closing price dropped to 1.3859 against 1.3898.
Indicator signals:
Moving averages
Trading is carried out below 30 and 50 moving averages, which indicates that the upward correction will continue for the pound.
Note: The period and prices of moving averages are considered by the author on the H1 chart and differs from the general definition of the classic daily moving averages on the D1 daily chart.
Bollinger Bands
A breakout of the upper border of the indicator in the area of 1.3863 will lead to a new wave of growth for the pound. A break of the middle border in the area of 1.3810 will increase the pressure on the pair.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in 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 short and long positions of non-commercial traders.
