To open long positions on GBP/USD, you need:
The British pound spent the whole day in a narrow horizontal channel, and so a breakout of resistance at 1.3791 was formed only by the end of the US session. Let's take a look at the 5-minute chart and see what happened there. We can see that it was not possible to wait for a good signal to enter the market from the 1.3791 level, since it was smeared, and entering long positions at the very end of the day while counting on the Asian market is not the best decision. Therefore, I decided to stay out of the market.
Bank of England Governor Andrew Bailey will speak today, and if he continues to ignore the topic of negative interest rates, then the pound will continue to grow further. The initial target will be resistance at 1.3825, since the pair's succeeding growth depends on it. A breakout and consolidation above this level, along with being able to test it from top to bottom can create an excellent buy signal in sustaining the bull market, which will hit a number of stop orders of major sellers and result in a sharp rise in GBP/USD towards a high of 1.3879, where I recommend taking profits. More persistent buyers will be waiting for an update of resistance at 1.3918. If the pound is under pressure following Bailey's speech, then forming a false breakout in the 1.3791area will be a signal to open new long positions. The moving averages, playing on the side of the buyers of the pound, are also located there. If traders are not active in the 1.3791 area, then it would be best to wait for a larger downward correction to the support area of 1.3757 and buy the pound there immediately on a rebound, counting on an upward correction of 20-25 points within the day.
To open short positions on GBP/USD, you need:
Bears will try to form a false breakout in the resistance area of 1.3825. This scenario will limit the pound's growth potential and create a new signal for short positions. An equally important task is to regain control of support at 1.3791, which they missed yesterday at the end of the US session. We can expect the pound to be under pressure if Bailey raises the topic of negative interest rates, leaving the possibility of their introduction in the future, once necessary. In this case, the pair might settle below 1.3791. Testing this level from the bottom up creates a good signal to sell GBP/USD in order to renew support at 1.3757, where I recommend taking profits. The succeeding target will be the low of 1.3721. If GBP/USD does not rapidly fall even after a false breakout is formed in the resistance area of 1.3825, then it is best not to rush to sell, but wait for a new wave of growth in order for the pound to reach a high of 1.3879, from which you can open short positions immediately on a rebound, counting on a downward correction in 20-25 points within a day. The next major resistance is seen around 1.3918.
The Commitment of Traders (COT) reports for February 2 revealed an increase in both long and short positions. This time there were more buyers, which led to an increase in the positive delta. The bulls' desperate attempts to surpass annual highs will lead to success sooner or later, so buyers do not lose hope that the bullish trend will continue in February. Each major decline in the pound prompts major players to raise long positions in anticipation of a more active GBP/USD recovery in the future. Long non-commercial positions rose from 47,360 to 53,658. At the same time, short non-commercial positions increased from 39,395 to 44,042, which prevented bears from taking control of the market. As a result of this, the non-commercial net position rose to the level of 9,616 against 7,965 a week earlier. The weekly closing price was 1.3675 against 1.3676. The fact that the bulls held their positions at such a high volatility within the week, once again suggests that the pair is clearly set to overcome annual highs. I recommend betting on the pound's succeeding growth. The demand for the pound will only increase as quarantine measures are lifted, which are expected to be phased out in February this year. The support for the population and the labor market, which will be announced in March, will also have a positive effect on the pound's rate. All the talk about negative interest rates from the Bank of England was postponed indefinitely last week, which allows the pound to spread its wings.
Indicator signals:
Moving averages
Trading is conducted above 30 and 50 moving averages, which indicates a further recovery in the pair.
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 1.3825 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 1.3757.
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.
