To open long positions on GBP/USD, you need:
Yesterday there was only one normal signal to sell the pound in the morning. The US session did not provide a convenient entry point. Let's take a look at the 5-minute chart and figure out what happened. In my morning forecast, I drew attention to the 1.3994 level and advised you to open short positions from it. We could clearly see how the bulls tried to settle above resistance at 1.3994, being able to return creates an excellent signal to open short positions in sustaining the decline. However, it was not possible to reach support at 1.3921 for the first time, although about 3 points were not enough to test this level. Therefore, we can safely say that the signal has worked 100%. It was not possible to get an adequate entry point for long positions from the 1.3921 level, since this support range was strongly vague in the afternoon.
Before examining the technical picture of the pound, let's take a look at what happened in the futures market. The demand for the pound remained, while the buyers' appetite continued to grow. The positive detail has significantly grown, thanks to a large increase in long positions, while short positions remained almost unchanged. The Commitment of Traders (COT) report for February 23 revealed that short commercial positions decreased while long positions sharply increased. Bulls are active even in the area of annual highs, which only accelerates the upward trend. However, you need to understand that this report only considers prices before the pound started to fall in the middle of last week, so the picture is slightly different. In the medium term, the downward correction observed last week will only play into the hands of bulls. The anticipation of a quarantine rollback in March will support the pound, and so do new measures to help the UK population in the fight against the coronavirus pandemic, which will be announced by Treasury Secretary Rishi Sunak this week. Long non-commercial positions rose from 60,269 to 68,266. At the same time, short non-commercials fell from 38,102 to 37,288, which retains good prospects for the pound to continue its gains. As a result, the non-commercial net position rose to 30,978 from 22,167 a week earlier. The weekly closing price was 1.4067 against 1.3914. The observed downward correction in the pound will only attract new buyers.
As for the technical forecast, the initial task is to return and consolidate at the resistance level of 1.3907, which the bulls missed in today's Asian session. Testing this level from top to bottom creates a signal to open long positions in hopes to form an upward correction, which will open a direct way to the high of 1.3994, where I recommend taking profits. The succeeding target will be the 1.4062 level, however, we can not reach it without a new portion of good fundamental reports. If the downward correction of GBP/USD continues this morning, then it is best not to rush into long positions, but to wait for a false breakout in the support area of 1.3840. If buyers are not active, then I recommend waiting for the 1.3775 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:
Important fundamental reports will not be released today, and judging by the trend that was observed since the middle of last week, the pound may still be under pressure. Bears will have control over the market as long as trading is below resistance at 1.3907. Forming a false breakout there in the first half of the day will weigh on the pair and lead to forming a new downward trend to the support area of 1.3840, as the pair's succeeding direction depends on whether the pair surpasses it or not. A breakthrough and being able to test this level from the bottom up can create another entry point into short positions in hopes of pulling down GBP/USD to the area of a low of 1.3775, where I recommend taking profits. In case the pair grows during the European session and bears are not active in the resistance area of 1.3907, then I recommend not to rush to sell, but wait until the 1.3994 high is renewed. 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 seen at the 1.4062 area.
Indicator signals:
Moving averages
Trading is carried out below 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 around 1.3950 will lead to a new wave of growth for the pound. A breakout of the lower boundary at 1.3890 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.
