To open long positions on GBP/USD, you need to:
In the first half of the day, several signals were formed to enter the market. Let's look at the 5-minute chart and analyze the entry points. At the beginning of the European session, the next formation of a false breakout at 1.3814 inspired confidence in the scenario of an upward correction, as I expected a good report on the UK services sector and the growth of the composite PMI index. However, after some time, the bears achieved a breakdown of this range, which led to a fall in the pair and losses. After some time: during the reverse test of the level of 1.3814, a good signal was formed from the bottom up to open short positions in the continuation of the bear market, but even then it was not possible to wait for a major downward movement. After a decline of 18 points, the pair turned around, and the bulls took control of the level of 1.3814. In this regard, I completely revised the technical picture for the second half of the day.
The focus of buyers during the US session will shift to the protection of the support of 1.3774, which coincides with the low of today. A false breakout will lead to the formation of a signal to open long positions to restore the pound to the resistance area of 1.3834, where I recommend taking the profits. A further target will be a maximum of 1.3876. If the bulls do not show much activity at the low of 1.3774, most likely, the pressure on the pair will increase. In this scenario, it is best to postpone purchases until the test of a larger minimum of 1.3819, from where you can open long positions immediately on the rebound, counting on an upward correction of 25-30 points within the day. Let me remind you that in the afternoon, we will publish the minutes of the meeting of the US Federal Reserve System from the last meeting, as well as a meeting of the G20 and the International Monetary Fund. The data may support the US dollar – of course, if investors conclude that the Fed is beginning to think about an earlier curtailment of the asset purchase program.
To open short positions on GBP/USD, you need to:
In the second half of the day, we will wait for a breakout and consolidation below the support of 1.3774. A test of this level from the bottom up will form another entry point into short positions to reduce the GBP/USD to a new low of 1.3719, where I recommend taking the profits. It is unlikely that the pound will fall below this range today, even after the publication of the Fed minutes. In the case of growth of GBP/USD in the second half of the day, I recommend not to rush with sales: the optimal scenario will be short positions for a rebound from the large daily resistance of 1.3834, based on a rebound of 20-25 points within the day.
Let me remind you that the COT reports (Commitment of Traders) for March 30 recorded a reduction in both long and short positions, while the total non-commercial net position increased. The bulls were active last week with each approach of the pound to large support levels, which led to such confusion in the market. The data that was released on the UK economy allowed us to build a new upward correction for the pound, even if only in the short term. Among investors and economists, confidence continues to grow that the UK economic recovery is gaining quite a good momentum, which will support the British pound this summer, as disagreements increase in the Bank of England over how the economy will develop further and when to respond to all this. Those who expect to buy the pound should take a closer look at the market. Thus, long non-profit positions declined from 51,843 to 47,222. At the same time, the short non-profit fell from 30,024 to 22,263, indicating a major revision of forces in the market in the near future. As a result, the non-profit net position rose to 29,959 from 21,819 a week earlier. The weekly closing price fell to 1.3774 from 1.3859.
Signals of indicators:
Trading is conducted below 30 and 50 daily averages, which indicates an attempt by the bears to seize the initiative of the market.
Note: The period and prices of the 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 lower limit of the indicator in the area of 1.3790 will increase the pressure on the pound.
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.