To open long positions on GBP/USD, you need:
The pound's movement from yesterday morning and its permanent strengthening during the US session did not result in forming signals for entering the market, since none of the levels were updated at the end of the day. Therefore, there is nothing to analyze from entry points. The 5-minute chart clearly shows the market's behavior during low trading volume, since everyone was focused on the euro and the European Central Bank's decision: the ECB made a direct statement that it would fight against the growth of bond yields by increasing purchases under the PEPP program, and otherwise left monetary policy unchanged. Whether other central banks, including the Bank of England, will follow suit, we will find out very soon.
If the pound falls in the first half of the day, forming a false breakout in the support area of 1.3928 will create an entry point to opening long positions in order to continue the pair's upward correction. The moving averages, playing on the side of the buyers of the pound, also pass there. The immediate target is still resistance at 1.3995, which was tested in today's Asian session, but it was not possible to break above which. Its breakout will completely cross out the bear market and lead to forming a new upward trend with the prospect of entering the 1.4062 area, where I recommend taking profits. The next major resistance area is seen around 1.4115. In case the pound falls during the European session after the release of a number of fundamental reports on the UK economy and the lack of activity in the 1.3928 area, then it would be best not to rush into long positions. The optimal scenario under this condition will be long positions in GBP/USD immediately rebound from a large support like 1.3857, counting on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
Reports on UK GDP, industrial production and activity in the service sector, which make up more than 70% of the country's economy, will be released today and they are important. Weak data will lead to a downward correction in the pair, and the initial task of the bears is to regain control over the 1.3928 level, which they missed yesterday. A breakthrough and being able to test the 1.3928 level from the bottom up will bring new sellers back to the market, hoping for a renewed decline in GBP/USD. A breakthrough of the moving averages that are in this range will lead to a larger sale of the pound and push it to return to a low like 1.3857, where I recommend taking profits. If the pound grows in the first half of the day, then it would be best not to rush to sell: you can open short positions if a false breakout forms in the resistance area of 1.3995, you can open shorts immediately on a rebound but only from a high like1.4062, counting on a downward correction at 30- 35 points within the day. The next major resistance area is seen around 1.4115.
The Commitment of Traders (COT) report for March 2 reduction in both short and long commercial positions. Closing short positions turned out to be stronger, which led to an increase in the positive delta. And although the growth in the yield of US bonds is providing serious support to the US dollar at the moment, in the medium term, bulls can only use the pair's correction in order to enter the market at more attractive prices. The anticipation of a quarantine rollback in March this year will support the pound, so will new measures to help the UK population in the fight against the coronavirus pandemic, recently announced by Treasury Secretary Rishi Sunak. Long non-commercial positions declined from 68,266 to 65,138. At the same time, short non-commercials fell from 37,288 to 29,056, which retains good prospects for the pound's succeeding growth. As a result, the non-commercial net position rose to 36,082 from 30,978 a week earlier. The weekly closing price was 13,928 against 14,067. The downward correction in the pound will attract new buyers.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates an attempt by buyers to continue the upward correction of the pair.
Note: The period and prices of moving averages are considered by the author on the H1 chart and differs from the general definition of the classic daily moving averages on the D1 daily chart.
Bollinger Bands
A breakout of the upper border of the indicator in the 1.4000 area will push the pound to rise. In case the pair falls, support will be provided by the lower border of the indicator at 1.3940.
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.
