To open long positions on GBP/USD, you need:
Quite a lot of profitable signals to enter the market appeared yesterday morning. The US session also went well enough, and it was possible to make money on the pound's decline. Yesterday I analyzed long deals in detail in my afternoon forecast. If you look at the 5-minute chart, you will see how the bulls surpassed the 1.3340 level, afterwards they returned to this range from the bottom up, which produced a good signal to open long positions. After that, it immediately rose to a high of 1.3388, where the first profit taking and a 25-point downward correction was observed. A repeated test of this level led to a breakout, afterwards a buy signal appeared, exactly like the first deal. The pound grew by another 50 points, which led to a renewal of the high of 1.3437, where I recommended selling the pound immediately on a rebound, and it happened. A downward correction from the 1.3437 level led to a renewal of support at 1.3388. Getting the pair to settle below this level and its renewal from the bottom up by the middle of the US session produced another entry point to short positions, which pushed GBP/USD to the 1.3340 area, from where growth was observed since the beginning of the European session. Thus, the technical picture has not changed in any way, and the goals and objectives, for both, remained the same.
The buyers' task is to maintain control over the 1.3290 level. Forming a false breakout there in the first half of the day will be an excellent signal to open long positions in hopes for the pound to recover in the short term. The main target will be a breakout and surpassing resistance at 1.3340, testing it from top to bottom produces an additional entry point to long positions in hopes to reach a high of 1.3388, where I recommend taking profits. The next targets are still resistances 1.3437 and 1.3489, but they will be available only if we receive good data on the unemployment rate and the number of applications for unemployment benefits in the UK in November. Also, any good news on the Brexit agreement will affect the course of trading. In case bulls are not active in the 1.3290 support area, it is best not to rush into long deals, but to wait for an update of the 1.3246 low. However, I recommend opening long positions from this level only after forming a false breakout. A larger support level is seen in the 1.3193 area, where you can buy GBP/USD immediately on a rebound, counting on a correction of 20-30 points.
To open short positions on GBP/USD, you need:
Bears will be concentrated at 1.3340. Like yesterday, forming a false breakout there will return the pressure to the pair and lead to a test of support at 1.3290, where the moving averages pass, which are still playing on the side of the pound buyers. Surpassing this level and testing it from the bottom up, similar to yesterday's sales from the highs, which I analyzed above, produces a good signal to sell the pound in hopes to fall to the 1.3246 low. Bad news on the trade deal will sharply pull down GBP/USD towards the lows of 1.3193 and 1.3114, on which the succeeding bear market will depend. If the bulls manage to recapture the 1.3340 level, then it is better not to rush with short positions. The optimal scenario for selling the pound would be failure to settle above 1.3388. I recommend opening short positions immediately on a rebound from the high of 1.3437, counting on a downward correction of 25-30 points within the day. Let me remind you that the parties agreed to continue negotiations this week, which will further complicate the issue of ratifying the agreement if it is reached at the last moment.
The Commitment of Traders (COT) reports for December 8 notes significant interest in the British pound. Long non-commercial positions rose from 37,087 to 39,344. At the same time, short non-commercial positions decreased from 44,986 to 33,634. As a result, the non-commercial net position became positive and jumped to 5,710 against a negative value of -7,899 a week earlier. All this suggests that traders are ready to bet on the pound's succeeding growth at the beginning of 2021 and on the buyers' advantage in the current situation even when there is no trade deal at the moment, and take note that there is just around two weeks left until the end of the year.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50 moving averages, which indicates the sideways nature of the market, even with such strong volatility.
Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the D1 daily chart.
Bollinger Bands
A break of the lower border of the indicator around 1.3290 will increase the pressure on the pound. A breakout of the average border of the indicator in the 1.3355 area will lead to a new wave of growth for 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.
