To open long positions on GBP/USD, you need:
Several market entry signals were generated last Friday. Let's take a look at the 5-minute chart and deal with them: you can see how after surpassing support at 1.3749, which I emphasized in the previous forecast, the pound started to significantly fall. Before the 1.3749 update, literally a couple of points were missing from the bottom up, which did not make it possible for me to enter the market. Then there was a return to this level and consolidation above, which resulted in creating a good entry point to long positions. The growth was about 50 points. Selling from resistance at 1.3804 did not bring the desired result, although in general the rebound was the expected 15 points.
The technical picture for today's European session has changed a lot, since we were already at completely different levels and the bulls need to fight in order to surpass new highs. To maintain the advantage, an important task is to surpass the 13838 level, which they reached last Friday. Being able to settle on this range and testing it from top to bottom creates an entry point to long positions in continuing the upward trend that formed on April 8. Such a scenario will surely open a direct road to the area of the new high at 1.3876, while the next, large area of resistance is seen near the 1.3914 level, where I recommend taking profit. But before buying above 1.3838, pay attention to the divergence that is forming on the MACD indicator, which can significantly limit the pair's growth potential. In case the pound falls, protecting the 1.3792 level and forming a false breakout there creates a signal for entering long positions in hopes that GBP/USD would grow further. The moving averages, playing on the side of the bulls, also pass there. If bulls are not active in the support area of 1.3792, then it is 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 1.3749, counting on an upward correction of 25-30 points within the day. The next major support is seen at 1.3706.
To open short positions on GBP/USD, you need:
Considering that the pair has come out of the horizontal channel and bulls are in control of the market, the bears need to do their best in preventing the pair from surpassing resistance at 1.3838. Forming a false breakout there in the first half of the day creates a convenient entry point against the trend, which will lead to a downward correction to the area of the first support at 1.3892, from where it will be possible to observe how bulls are active. A breakthrough and consolidation below this range with a test from the bottom up can create a good signal to open new short positions in hopes that GBP/USD would further fall to a low like 1.3749, and the next target will be support at 1.3706, where I recommend taking profits. If bears are not active in the resistance area of 1.3838, then it is best not to rush to sell: I recommend postponing short positions immediately for a rebound from a new high of 1.3876, counting on a downward correction of 25-30 points within the day. The next major resistance is seen at 1.3914.
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 just below the 30 and 50 moving averages, which indicates another growth 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.
Growth will be limited by the upper level of the indicator in the 1.3850 area. In case the pound falls, support will be provided by the lower border of the indicator at 1.3790.
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.