To open long positions on GBP/USD, you need:
Several signals to enter the market appeared yesterday. Let's take a look at the 5-minute chart and analyze the deals: it is clear that a false breakout in the 1.3942 area, after the bulls failed to rise above this level, led to creating a signal to open short positions in continuing the downward trend observed at the end of last week. As a result, the pair fell to the 1.3882 target, which brought around 60 points of profit. A false breakout was formed in the support area of 1.3882 during the US session, where I advised you to open long positions. However, there was no major upward movement from this level and the trading day closed just above this range.
Before examining the technical picture of the pound, let's take a look at what happened in the futures market. The pressure on the pound continues to persist, which is clearly seen in the decline in the weekly closing price. The Commitment of Traders (COT) report for March 9 revealed a reduction in both short and long commercial positions. This time, the closing of long positions became quite strong, which led to a reduction in the positive delta. The main problem for risky assets, which can be attributed to the pound, is still the growth in the yield of US bonds, which provides serious support to the US dollar. However, in the medium term, buyers of the pound will certainly take advantage of this moment to enter the market at more attractive prices. The beginning of quarantine measures in March will continue to provide the main support for the pound, as well as new measures to help the UK population in the fight against the coronavirus pandemic. Long non-commercial positions declined from 65,138 to 61,271. At the same time, short non-commercials declined from 29,056 to 27,360, indicating a succeeding decline for the pair. As a result, the non-commercial net position fell to 33,911 from 36,082 a week earlier. The weekly closing price dropped to 1.3821 against 1.3928. The observed downward correction in the pound will attract new buyers.
As for the technical picture, the bulls' initial task is to return and settle at resistance at 1.3903, which the bulls missed during yesterday's European session. Moving averages, playing on the side of bears, also pass slightly above this level. Surpassing this range and testing it from top to bottom will lead to creating an excellent entry point into long positions in hopes for GBP/USD to rise to the 1.3951 area, where I recommend taking profits. The next target will be the 1.4000 level, however, we can't reach it without a new batch of good fundamental reports. If the downward correction of GBP/USD continues until the morning, then it would be best not to rush into long positions, but to wait for a false breakout in the 1.3844 area. If bulls are not active, then I recommend waiting for the 1.3783 low to be tested and buy the pound from there on a rebound, counting on an upward correction of 25-30 points within the day. The more the pound falls, the more attractive it is for new buyers.
To open short positions on GBP/USD, you need:
The UK will not release important fundamental reports today, and judging by the trend observed since the end of last week, pressure on the pound may continue. The bears will regain control of the market as long as trading is below resistance at 1.3903. Forming a false breakout there in the first half of the day will return pressure to the pair and result in creating a new downward movement to the support area of 1.3844, being able to test it will keep the trend towards strengthening the US dollar. A breakthrough of this level with a reverse test from the bottom up creates another entry point into short positions in hopes to pull down GBP/USD to a low like 1.3783, where I recommend taking profits. In case the pair grows during the European session and bears are not active in the resistance area at 1.3903, then I recommend not to rush to sell, but to wait until the 1.3951 high is updated. You can open short positions from there immediately on a rebound, counting on a downward correction of 30-35 points within the day. The next big resistance is only seen around 1.4000 from which one can act in a similar way.
Indicator signals:
Moving averages
Trading is carried out below 30 and 50 moving averages, which indicates that the downward correction will continue.
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 average border of the indicator in the area of 1.3895 will lead to an upward correction for the pound. A breakout of the lower boundary at 1.3855 will increase the pressure on the pair.
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.
