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 all the trades. I paid close attention to the resistance of 1.3838 and recommended buying the pound from it, which happened: the bulls made a breakthrough and tested this area from the bottom up, which formed an excellent entry point into long positions. We reached the first target of 1.3876 very quickly. Consolidation above this level, similar to the morning purchase, led to the formation of a new signal to open long positions and then to an increase to a larger maximum of 1.3914. After a small downward correction from this level, the bulls decided to continue their march to the north and at the time of writing, they achieved a breakdown of the resistance of 1.3914.
Only a consolidation at the level of 1.3914 with a test of it from top to bottom, as it was with the first two signals today, forms an entry point into long positions in the continuation of the upward trend. Such a scenario will open a direct road to the area of a new high of 1.3953, while the next large resistance area is visible near the level of 1.3999, where I recommend taking the profits. In the scenario of a decline in GBP/USD in the afternoon, all that buyers need is to protect the support of 1.3876. The formation of a false breakout will be an excellent entry point into the continuation of the bull market. In the scenario of the absence of bull activity in the support area of 1.3876, it is best not to rush with purchases: the best option is to open long positions immediately on the rebound from the large local minimum of 1.3838, from which all the upward movement began today. There are also moving averages that play on the side of buyers.
To open short positions on GBP/USD, you need to:
Sellers defended the resistance of 1.3914 for a while. The main task of the bears for the second half of the day will be the next formation of a false breakout and the return of the pair to the level of 1.3914, which forms a signal to open short positions. This will lead to a rapid decline in GBP/USD to the support area of 1.3876, where I recommend taking the profits. An equally important goal for sellers will also be to regain control of this level, but due to the lack of important fundamental statistics and such a strong bullish trend, this is unlikely to be possible. Only a break of 1.3876 will push GBP/USD back to the low of 1.3838. In the scenario of further growth of GBP/USD during the US session above the level of 1.3914, it is best not to rush to sell: the best option is to take short positions immediately to rebound from the new resistance of 1.3953, based on a downward correction of 25-30 points within the day. The next major resistance is seen in the area of 1.3999.
Let me remind you that the COT reports (Commitment of Traders) for April 6 recorded a reduction in long positions and an increase in short ones, while the total non-commercial net position decreased. Bears actively sold the pound all last week against the background of the tense situation with Brexit, which by the end of the week led to mass riots in Ireland. The good fundamental data that was released on the UK economy last week only led to a high spike in volatility, after which the pair continued its decline. However, investors and economists remain confident that the UK economic recovery is gaining quite a good momentum, which will support the British pound in the summer of this year. The Bank of England has long been increasingly divided over changes in monetary policy. As the economy grows, there will be additional problems with inflation, which will need to be responded to. Those who expect to buy the pound should take a closer look at the market, as now there are quite good prices, which may not be in the near future. Thus, long non-profit positions declined from the level of 47,222 to the level of 45,270. At the same time, the short non-profit rose from the level of 22,263 to 25,219, which indicates an attempt to control the market by sellers in the short term. As a result, the non-profit net position fell to the level of 19,951 from the level of 21,819 a week earlier. The weekly closing price, on the contrary, rose to 1.3913 from 1.3774.
Signals of indicators:
Trading is conducted above 30 and 50 daily averages, which indicates the continued growth of the pound in the short term.
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.
In the case of a decline, the average border of the indicator in the area of 1.3855 will act as support.
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.