To open long positions on GBP/USD, you need:
Several market entry points were created yesterday. Let's take a look at the 5 minute chart and break them down. In my morning forecast, I paid attention to the 1.3903 level and advised you to open long positions from it. We can see how the bulls are trying to break through resistance at 1.3903, continuing the upward trend, after which a return and a reverse test of this level from top to bottom occurs. The condition for generating a signal to open long positions is fulfilled. The upward movement was 26 points, but I was counting on a larger increase. We did not reach the target value that was indicated in the morning. After the pound fell to the designated support at 1.3880 in the afternoon, the bears tried to settle below this level, however, when it was tested from the bottom up (when a sell signal should have appeared), a breakthrough and consolidation occurred above this range, which canceled plans to enter the market. Even despite the fact that the downward movement was around 30 points then - I did not sell the pound on this signal.
In yesterday's report, the Federal Reserve announced that the committee will continue to maintain the current federal funds rate unchanged until the labor market reaches maximum employment and inflation rises to 2% and does not exceed it for some time. This resulted in a slight strengthening of the British pound, but as we can see - that was it. For further growth, the bulls need to rise above the resistance level of 1.3964, which they failed to catch in today's Asian session. A consolidation above this level along with being able to test it from top to bottom creates a new entry point into long positions in hopes for a more active recovery so the pair could reach resistance at 1.4014, and then it can return to a high like 1.4063, where I recommend taking profits. Let me remind you that the Bank of England will take place today, where it can make decisions on monetary policy. Economists do not expect any changes in the terms of the bond purchase program, so it is possible that the pound will fall in the first half of the day. In this scenario, I recommend not to rush to buy, but to wait for support at 1.3910 to be tested, where you can open long positions immediately on a rebound, counting on a recovery of 30-35 points within the day and a return to resistance at 1.3964 in order to continue the bull market. There are moving averages that play on the buyer's side below 1.3910. If traders are not active in the 1.3910 area and the pound rapidly moves up, then the optimal scenario under this condition will be to buy GBP/USD to rebound off the next support at 1.3855, counting on the same upward correction of 30-35 points within the day.
To open short positions on GBP/USD, you need:
The initial challenge is to maintain control of the 1.3964 resistance, which the bulls are likely to test this morning before the Bank of England's monetary policy decision is announced. Forming a false breakout there creates a new entry point for short positions in hopes to bring back the downward correction for the pair. In this case, the bears will aim for support at 1.3910, a breakthrough to the downside which will be very problematic without an unexpected statement from the British central bank. A breakthrough and being able to test the 1.3910 level from the bottom up will create an additional entry point into short positions in order for it to return to the 1.3855 low, where I recommend taking profits. If bears are not active in the resistance area of 1.3964, then it would be best not to rush to sell: you can open short positions immediately on a rebound from the high of 1.4014, 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 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.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates the bulls' attempt to continue rising.
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
Growth will be limited by the upper level of the indicator in the 1.4000 area. The pound's fall is limited by the lower level of the indicator in the 1.3855 area.
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.
