To open long positions on GBPUSD, you need to:
Several unsuccessful attempts by the bulls to get above the resistance of 1.3701, which I paid attention to in my morning forecast, led to the formation of a sell signal for the pound. On the 5-minute chart, I highlighted the areas where the signal was formed and where it was confirmed. At the time of writing, the downward movement was about 45 points, after which the fall of the pound slowed down.
Given that in the first half of the day, the pair did not leave the trading range of 1.3649-1.3701, and the major growth of the pound slowed down after yesterday's upward dynamics, the emphasis for buyers and sellers remained the same. Let me remind you that the upward trend was formed after the news that the Bank of England abandoned the idea of resorting to the introduction of negative interest rates due to their negative impact on the English banking system. The initial goal of the bulls remains a breakout and consolidation above this year's high at 1.3701, which may lead to the demolition of several stop orders. Such a scenario will only spur the pound to a larger upward trend already in the area of 1.3750 and 1.3803, where I recommend taking the profits. If no active purchases will be recorded after updating the maximum of 1.3701, it is better not to rush with long positions. In this case, you need to wait for the release of data on inflation in the United States, and then make a decision. In the case of a downward correction to the support area of 1.3649, only the formation of a false breakout forms a signal to enter the market. If there is no activity from the bulls, I recommend that you postpone long positions until the update of the larger support of 1.3590, which was formed yesterday in the first half of the day. There are also moving averages, so you can open long positions immediately on the rebound with the expectation of an upward correction of 30-40 points within the day.
To open short positions on GBPUSD, you need to:
Sellers coped with the morning task and did not let the pair above the resistance of 1.3701. Bears in the second half of the day will try to prevent the growth of GBP/USD above the resistance of 1.3701, but only the formation of a false breakdown there will form a signal to open short positions with the aim of a downward correction to the area of intermediate support of 1.3649, to which the pound fell just a couple of points today. An equally important task for sellers will be to break out and consolidate below this range, the test of which from the bottom-up forms a convenient entry point into short positions, which will quickly push GBP/USD to the area of the minimum of 1.3590, where I recommend fixing the profits. If there will be no activity on the part of sellers after weak data on inflation in the US and the growth of the pound in the resistance area of 1.3701, in this case, it is best to postpone short positions until the highs in the area of 1.3750 are updated or sell GBP/USD immediately for a rebound from the resistance of 1.3803, counting on a downward correction of 30-40 points within the day.
Let me remind you that COT reports (Commitment of Traders) for January 5 recorded a slight decrease in interest in the British pound, but this does not affect the overall picture. Long non-commercial positions decreased from 37,550 to 35,526. At the same time, short non-commercial positions remained practically unchanged and increased only from 31,518 to 31,861. As a result, the non-commercial net position, although it decreased, remained positive and amounted to 3,665 against 6,032 a week earlier. All this suggests that traders continue to bet on the strengthening of the pound even in the face of a new strain of COVID-19, for which there is no vaccine yet. The demand for the pound is limited by quarantine measures in the UK, which will be canceled sooner or later after the situation with infections has stabilized. Additional stimulus by the Bank of England, which will soon be discussed by economists, may also somewhat smooth the upward trend in the pound.
Signals of indicators:
Trading is above 30 and 50 daily averages, which indicates a possible continuation of the pound's growth.
Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
A break of the upper limit of the indicator in the area of 1.3594 will lead to a new wave of growth of the pound. In the event of a decline in the pair, support will be provided by the average border of the indicator in the area of 1.3535.
Description of indicators
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence / divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit 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 the short and long positions of non-commercial traders.