To open long positions on GBP/USD, you need:
Several signals to enter the market were created yesterday. Let's take a look at the 5 minute chart and break it down. Even in my afternoon forecast, I drew attention to forming a signal to open long positions from the 1.3820 level. Testing this range from top to bottom after forming a false breakout was an excellent entry point into long positions. We did not reach the target value of 1.3862, but the upward movement was more than 30 points. The bears managed to settle below the 1.3820 level towards the end of the US session, which led to forming a signal to open short positions, which was realized in today's Asian session.
There are a lot of important fundamental statistics on the state of the UK economy today. The GDP report is the most important. We can expect the pound to rise if the indicators turn out to be better than economists' forecasts, which will restore confidence on the future of the British economy. Forming a false breakout and protecting support at 1.3783 will be the initial task of buyers in the first half of the day. You can open long positions in this scenario, expecting the price to return to the resistance of 1.3820, where the moving averages pass, playing on the side of the pound sellers. It is possible to speak about the resumption of the bull market only after a breakout and when the pair settles above 1.3820, which will return GBP/USD to the area of the annual high in the 1.3862 area, where I recommend taking profit. In case buyers are not active in the 1.3783 area, then it would be best to postpone long positions until a more recent low at 1.3732 has been tested, from which you can open long positions immediately on a rebound with a correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
Bears will try to settle below support at 1.3783, which they missed earlier this week. However, the downward correction for the pair will only continue if this level is tested from the bottom up, which creates a good signal to open short positions. A weaker report on UK GDP growth rates in the fourth quarter of 2020 may serve as a catalyst for the pound's decline. This will lead to a new wave of decline for GBP/USD with an exit to the low of 1.3732, where I recommend taking profits. A further target will be the 1.3680 area, but it will not be so easy to reach it. In case the pound grows in the first half of the day after the economic data is released, then I recommend considering short positions only after a false breakout is formed in the resistance area of 1.3820. Lack of activity in that area can lead to a significant strengthening of the pair. Therefore, I recommend selling GBP/USD immediately to rebound from a high of 1.3862, counting on a downward correction of 20-25 points within the day.
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 carried out below 30 and 50 moving averages, which indicates that the pair is still under pressure.
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 break of the lower border of the indicator in the 1.3783 area will increase the pressure on the pound. Growth will be limited by the upper level of the indicator at 1.3840.
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.
