To open long positions on GBP/USD, you need:
Yesterday, quite a lot of good signals for entering the market appeared in the first half of the day, but trading in the US session was much more difficult. Let's take a look at the 5 minute chart and break down the trades. I paid close attention to resistance at 1.3838 and advised you to buy the pound from this level, which is what happened: the bulls surpassed this level and tested this area, which created an excellent entry point into long positions. We quickly reached the first target at 1.3876. Consolidation above this level, by analogy with the long position in the morning, led to creating a new signal to open longs, and then to rise to a larger high at 1.3914. After a small downward correction from this level, the bulls decided to continue pushing the pair to the upside and managed to surpass resistance with a subsequent exit to the highs of 1.3953 and 1.3999. Selling on a rebound from these levels could not be done, since the 5-minute candlestick closed above these levels during the very first test.
Before examining the technical picture of the pound, let's take a look at what happened in the futures market. Although there is quite a lot of turmoil there, the situation is in favor of the bulls. The Commitment of Traders (COT) for April 13 revealed an increase in both long and short positions, while the total non-commercial net position grew, which indicates that the bulls are more active. Good fundamental data, which have recently been released on the UK economy, once again prove that there is a fairly high probability of strong economic growth rates in the second quarter of this year, which will further contribute to the pound's growth in the medium term. The Bank of England has long been talking about how to proceed with stimulating monetary policy, as additional inflation concerns will emerge as the economy grows. The pound's growth at the beginning of this week once again proves its appeal for big players and, most likely, the bull market will only gain momentum by this summer.
The COT report indicated that long non-commercial positions rose from 45,270 to 52,851. At the same time, short non-commercials increased from 25,219 to 27,261, bringing the non-commercial net position to 25,590 from 19,951 weeks earlier. On the contrary, the weekly closing price dropped to 1.3753 from 1.3913.
Today we are expecting a fairly large number of fundamental reports on the UK labor market, to which the British pound may react with a surge in volatility in the short term. Good reports will push the pound to rise, while difficulty in the labor market could lead to a downward correction in the pair. Therefore, in the first half of the day, the bulls will focus on resistance at 1.4000, beyond which it was not possible to get out of yesterday. A breakthrough and consolidation above this level with a test from the bottom up will only strengthen the pound's position, which will lead to continuing the upward trend so it can reach a high of 1.4062. The next larger resistance area is seen around 1.4115, where I recommend taking profits. In case GBP/USD falls in the first half of the day, then bulls need to protect support at 1.3944, just below which are the moving averages that are playing on their side. Forming a false breakout there creates an excellent signal for entering long positions in continuing the growth of GBP/USD. In case bulls are not active in the support area of 1.3944, 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 1.3892, counting on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
The bears' initial task in the morning will be to protect resistance at 1.4000. One can only think about selling the pound against the trend once the UK labor market report has been released and a false breakout has formed, while counting on the quote to fall to the support area of 1.3944. A breakthrough and consolidation below this range with a reverse test from the bottom up can create another entry point into short positions with an exit to the 1.3892 area. The next target will be the 1.3838 level, but this is if bears are very active in the first half of the day. In case the price grows above resistance at 1.4000 and we receive a good report on the labor market, which is expected as the British economy recovers: then I recommend holding back from short positions until a test of a new local high around 1.4062, where you can sell the pound in case of a false breakout. Selling GBP/USD immediately on a rebound can be considered only after the renewal of a new local high in the area of 1.4115.
Trading is carried out above 30 and 50 moving averages, which indicates a continuation of the bull market.
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 1.4030 will lead to a new wave of growth for the pound. In case the pair falls, support will be provided by the lower border of the indicator at 1.3925.
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.