To open long positions on GBP/USD, you need:
Yesterday was quite a profitable day for trading the British pound. Let's look at the 5-minute chart and analyze all the trades during the day. I paid attention to the 1.3944 level in my morning forecast and advised you to make a decision based on it. Nondescript fundamental reports on the growth of inflation in the UK and a false breakout of the 1.3944 level resulted in creating a good entry point into short positions. As a result, there was a downward movement to the 1.3892 target level, where I recommended taking profits. The movement was about 50 points. Then, in my afternoon forecast, I advised you to buy the pound when forming a false breakout from the 1.3892 level, and everything happened with the precision of the European session, only in the opposite direction. The bulls did not hesitate and the bears failed to settle below 1.3892, thereby creating an excellent entry point into long positions in sustaining the upward trend. By the end of the day, the pair returned to the 1.3944 high, making it possible to pick up another 50 points.
Important fundamental statistics from the UK will not be released today, with the exception of a report on the balance of industrial orders from the Confederation of British Industry. However, it is unlikely that it will make any difference to traders of the pound. The bulls need to surpass 1.3944 in order to sustain the bull market, which they missed on Tuesday afternoon. Consolidating on this range and testing it from top to bottom creates an entry point for long positions in continuing the upward trend. Such a scenario can push GBP/USD to the area of this week's high at 1.4000, where I recommend taking profits. A breakthrough and consolidation above this range, with a test from top to bottom, will push the pound to a new major resistance in the area of 1.4062. In case the pound falls in the first half of the day: protecting 1.3892 (by analogy with yesterday's entry point) and forming a false breakout there creates a signal for entering long positions in hopes of renewing growth. If bulls are not active in the support area of 1.3892, 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 like 1.3838, counting on an upward correction of 25-30 points within the day. The next big support is seen at 1.3792.
To open short positions on GBP/USD, you need:
The pound will remain under pressure as long as the pair is trading below the resistance of 1.3944. Forming the next false breakout there in the first half of the day creates another entry point into short positions against the trend, which will lead to a downward correction to the support area of 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 as we count on GBP/USD to fall to a low like 1.3838, and the next target will be support at 1.3792, where I recommend taking profits. If bears are not active in the resistance area of 1.3944, then it is best not to rush to sell: in this case, I advise you to hold back from short positions until the test of the weekly high of 1.4000, where failing to consolidate and returning to the area under this level creates a convenient entry point to the market. I recommend selling GBP/USD immediately on a rebound from the new local high of 1.4062, counting on a downward correction of 25-30 points within the day.
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.
Trading is carried out above 30 and 50 moving averages, which indicates a horizontal channel and the difficulty of determining the direction of the market 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.
Surpassing the upper border in the 1.3944 area will lead to a new wave of growth for the pound. Surpassing the lower border in the area of 1.3910 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.