To open long positions on GBP/USD, you need:
Yesterday was quite an interesting day for the British pound. Let's look at the 5 minute chart and analyze all the trades: In my morning forecast, I drew attention to resistance at 1.3773 and advised you to act based on it. You could clearly see that the bulls managed to surpass the 1.3773 level in the first half of the day, and afterwards the pound actively grew. Unfortunately, we didn't wait for a reverse test of this area from the bottom up, since there were literally 5 points missing during the first correction before the update. So I was forced to skip all the growth in the morning. After a while, the bears managed to regain control of the 1.3773 level and even tested it from the bottom up, which resulted in creating a signal to sell the pound. The downward movement was over 25 and then it stopped. A sharp return to 1.3773 in the afternoon and a reverse test of this area from top to bottom created a good signal to buy GBP/USD. The upward movement was also around 20 points, but this did not lead to a larger upward trend. Considering that we had already traded quite a lot at the 1.3773 level, I completely revised the nearest support and resistance levels.
Today, the bulls have nothing to count on since we don't have any important reports on the British economy. Therefore, the bulls need to rise above resistance at 1.3792 as soon as possible, since having the pair settle above this level along with being able to test it from top to bottom can create a new entry point into long positions in continuing the upward trend formed on April 8. Such a scenario will certainly open a direct road to the area of the new high at 1.3834. The next resistance area is seen around the 1.3876 level, where I recommend taking profits. In case GBP/USD falls during the European session, all buyers need to do is to protect support at 1.3746. Moving averages, playing on the side of the bulls, also pass slightly above this level. Forming a false breakout there creates an excellent signal into entering long positions in hopes that GBP/USD returns to resistance at 1.3792. In case bulls are not active in the support area of 1.3746, then it would be best not to rush to buy: the best option would be to open long positions immediately on a rebound from a large local low of 1.3703, counting on an upward correction of 25-30 points within the day. The next major support is seen at 1.3670.
To open short positions on GBP/USD, you need:
The bears' main task in the first half of the day is to protect resistance at 1.3792. Forming a false breakout there generates a signal to open short positions, which will quickly push GBP/USD into the area of the middle of the 1.3746 channel, where I recommend taking profits. An equally important goal is to regain control over this level. Since we will not receive any important fundamental reports on the UK economy during the European session, only a breakthrough and consolidation below the 1.3746 range with a test from the bottom up can create a good signal for you to open short positions in hopes that the pound would fall to a low like 1.3703. In the event of a further upward correction in GBP/USD, then it is best not to rush to sell: the absence of a false breakout around the 1.3792 high could lead to a larger recovery in the pair. In this case, the best option would be to open short positions immediately on a rebound from the new resistance at 1.3834, counting on a downward correction of 25-30 points within the day. The next major resistance is seen at 1.3876.
The Commitment of Traders (COT) for April 6 revealed that long positions decreased and short ones increased, while the total non-commercial net position fell. Bears have been actively selling the pound last week amid a tense Brexit situation, which led to riots in Ireland by the end of the week. Good fundamental reports on the UK economy that came out last week resulted in a high surge in volatility, afterwards the pair continued to fall. However, investors and economists believe that the UK economy is recovering and it is gaining quite good momentum. This will support the pound this summer. Meanwhile, at the Bank of England, the controversy over changes in monetary policy has long been growing, as additional inflation problems emerge as the economy grows and this will have to be addressed. Those who wish to buy the pound should take a closer look at the market, since there are quite good prices now, which may not be available in the near future.
So: long non-commercial positions fell from 47,222 to 45,270. At the same time, short non-commercial positions rose from 22,263 to 25,219, which indicates that bears are trying to control the market in the short term. As a result, the non-commercial net position fell to 19,951 from 21,819 a week earlier. On the contrary, the weekly closing price rose to 1.3913 from 1.3774.
Trading is carried out above 30 and 50 moving averages, which indicates an attempt by the bulls to resume the upward correction for the pair.
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.
Surpassing the upper border of the indicator in the area of 1.3795 will lead to a new wave of growth for the pound. Surpassing the lower border of the indicator in the area of 1.3755 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.