To open long positions on GBP/USD, you need:
It was quite difficult to trade the pound last Friday. Let's take a look at the 5 minute chart and talk about what happened. At the very first test of support at 1.3908, a false breakout was formed, which led to a sharp rise in the pound. However, it was a rather dubious pleasure to open long positions after that, as the pair bounced off this level quite significantly. The next test has already led to a breakdown of this range, from which it was not possible to wait for new intelligible signals. It was possible to sell in the afternoon after resistance was updated at 1.3983, but even there the situation was exactly the same as with long positions from the 1.3908 low. The very rapid fall of the pound after the 1.3983 test gave a bad enough price to open short positions. Therefore, I missed all the signals.
A report on the manufacturing sector in the UK will be released this morning, which should be in good order, which may support the upward correction of the pound, which was outlined in the Asian session. An important task for buyers will be to break out and settle above the resistance level of 1.3994, where the moving averages pass, playing on the side of the pound sellers. A downward test of this level creates a signal to buy GBP/USD in hopes to return to resistance at 1.4062, where I recommend taking profits. The succeeding target will be resistance at 1.4115. In case the pound falls in the first half of the day, and this can happen at any time, since the bears are still in full control of the market, it is best to wait for a false breakout to form in the support area of 1.3921 and open long positions from there. If buyers are not active in the 1.3921 area, I recommend postponing long positions until the test of the 1.3840 low, from which you can buy the pound immediately on a rebound, counting on an upward correction of 25-30 points within the day. The next buy level is seen in the area of 1.3775.
To open short positions on GBP/USD, you need:
The initial task of the bears is to regain control of support at 1.3921, which was not done last Friday. Consolidating below this level and testing it on the reverse side generates a signal to open short positions in hopes to pull down the pair to the area of 1.3840, where I recommend taking profits. The succeeding target will be the area of 1.3775. Forming a false breakout in the area of 1.3994, after the release of a number of fundamental data on the British economy, creates a fairly good signal to sell the pound. If bears are not active there, I recommend opening short positions immediately on a rebound from a high of 1.4062 counting on a downward correction of 30-35 points within the day.
The Commitment of Traders (COT) report for February 16 revealed a reduction in both long and short commercial positions. Despite this, the bulls break through to new highs each time, taking advantage of the good news on vaccinations in the UK and good fundamentals, indicating economic growth even during the lockdown. The news that the UK will resort to easing quarantine measures in March will further fuel investors' interest in the pound. Long non-commercial positions fell from 60,513 to 60,269. At the same time, short non-commercial positions fell from 39,395 to 38,102, which kept the market bullish. As a result, the non-commercial net position rose to 22,167 from 21,118 a week earlier. The weekly closing price was 1.3914 against 1.3745. Any downward corrections with an immediate buy-back of the pound once again proves the presence of large players in the market. Constant updates of local highs and consolidation on them will contribute to the bullish trend that we have been observing since the beginning of February this year.
Indicator signals:
Moving averages
Trading is carried out below the 30 and 50 moving averages, which indicates a succeeding decline for the pound in the short term.
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 1.3994 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 in the area of 1.3900.
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.
