To open long positions on GBP/USD, you need:
An excellent signal for entering the market from the 1.3882 level was formed last Friday afternoon, which I paid attention to in my forecast. Let's take a look at the 5-minute chart and talk about what happened. You could clearly see that after a rapid decline in the pound, a test of support at 1.3882 took place, from which I recommended buying the pair for an upward correction. A false breakout of this level led to the expected growth of GBP/USD by 25 points. No other signals were generated during the US session.
The bulls' strategy for the first half of the day did not change much. In case the pound falls, forming a false breakout in the support area of 1.3882 creates an entry point to long positions in order to continue the upward correction. However, the bulls need to rise above the resistance of 1.3942 to reach a significant growth, which is where the moving averages pass that play on the side of the bears. Being able to settle above this level creates a point of entry into long positions in hopes to reach a high like the 1.4000 area, where I recommend taking profits. In case the pound falls in the first half of the day and traders are not active in the 1.3882 area, then it is best not to rush to buy: the optimal scenario under this condition is to buy GBP/USD immediately on a rebound from a large support at 1.3830, counting on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
The initial task is to maintain control of resistance at 1.3942. Forming a false breakout there in the afternoon creates a new entry point to short positions in order to continue the downward correction. In this case, the bears will aim for support at 1.3882, where I recommend taking profits. An equally important goal is to break through and test this level from the bottom up, which will create an additional entry point into short positions in hopes to return to a low of 1.3830. If bears are not active in the resistance area at 1.3942, then it would be best not to rush to sell: you can open short positions immediately on a rebound but only from a high like 1.4000, counting on a downward correction of 30-35 points within the day. The next major area of resistance is seen around 1.4062.
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 below 30 and 50 moving averages, which indicates an attempt by the bears to protect the 1.3942 level and continue the downward correction for 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 area of 1.3942 will push the pound to rise. In case the pair falls, support will be provided by the lower border of the indicator in the area of 1.3882.
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.
