To open long positions on GBP/USD, you need:
Yesterday there was not a single normal signal to enter the market. After the 1.3649 level turned out to be vague, the pair did not test any of the other areas. The only emphasis could be placed on the 1.3701 resistance update that occurred after Jerome Powell's speech, but it was difficult to come up with something there, since the test took place at the end of the US session, and the prospects for moving even further were very small.
This morning the entire focus will be on fundamental data on the UK economy. The report on GDP and changes in industrial production may weigh on the British pound. But if the indicators turn out to be better than economists' forecasts, one can count on surpassing the annual highs, which is where trade is being conducted now. The bulls hope to settle above this year's high at 1.3701, which could result in removing a number of stop orders. This scenario will push the pound to a larger upward trend in the area of 1.3750 and 1.3803, where I recommend taking profit. If there are no active purchases after updating the high of 1.3701, it is better not to rush with long positions. A more optimal scenario would be a downward correction of GBP/USD to the support area of 1.3661, where a false breakout creates a signal to enter the market. If bulls are not active, I recommend postponing long positions until a larger support at 1.3624, which appeared yesterday morning, has been updated. You can buy the pound from this level immediately on a rebound, counting on an upward correction of 30-40 points within the day.
To open short positions on GBP/USD, you need:
The pressure on the British pound will depend on fundamental reports, and how active sellers are at this year's highs. The bears will try to prevent GBP/USD from rising above the resistance of 1.3701, and forming a false breakout there in the first half of the day will be a signal to open short positions, counting on a downward correction to the area of intermediate support at 1.3661, where the moving averages play on the side of the pound buyers. Sellers have the important task of being able to settle below this range, testing it from the bottom up creates a convenient entry point for short positions, which will quickly pull down GBP/USD to a low of 1.3624, where I recommend taking profits. If bears ignore resistance at 1.3701, then it is best to postpone short positions until highs are renewed in the 1.3750 area, or to sell GBP/USD immediately on a rebound from the resistance at 1.3803, counting on a downward correction of 30-40 points within the day.
The Commitment of Traders (COT) report for January 5 recorded a slight decline in interest in the British pound, but this does not affect the overall picture. Long non-commercial positions decreased from 37,550 to 35,526. At the same time, short non-commercial positions remained practically unchanged and only increased from 31,518 to 31,861. As a result, the non-commercial net position, although it decreased, remained positive and reached 3,665 against 6,032 a week earlier. All this suggests that traders continue to bet on the strengthening of the pound, even in the face of the new Covid-19 strain, for which there is no vaccine yet. The demand for the pound is limited by quarantine measures in the UK, which will sooner or later be canceled after the infection stabilizes. Additional stimulus from the Bank of England, which economists will soon talk about, may also somewhat smooth out the upward trend in the pound.
Indicator signals:
Moving averages
Trading is carried out just above the 30 and 50 moving averages, which indicates an attempt by the bulls to take control of the market.
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 daily D1 chart.
Bollinger Bands
A breakout of the upper border of the indicator in the 1.3705 area will lead to a new wave of growth for the pound. In case the pair falls, support will be provided by the lower border of the indicator at 1.3625.
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.
- Non-commercial short 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.
