To open long positions on GBP/USD, you need:
Yesterday, the British pound showed a rather low volatility throughout the day, which reached around 35 points, which did not make it possible to enter the market from the support and resistance levels I have indicated. The reason is very simple - the pair never managed to reach them. Even the report on the US economy, where the report exceeded the forecasts of economists, did not lead to an increase in trading volume. According to the report, US real gross domestic product grew 6.4% in the first quarter of this year, following a 4.3% jump in the fourth quarter of 2020. Economists had expected a 6.0% increase in GDP. The technical picture for the first half of the day and the action plan remained unchanged.
It is important for the bulls to surpass the 1.3917 range in the first half of the day, where forming a false breakout will be a signal to open new long positions, counting on continuing the April upward trend. An equally important task for the bulls is to surpass the 1.3970 level, which limited the pair's growth yesterday. Consolidating on it with a reverse test from top to bottom can create another entry point to long positions in hopes of an exit to resistance at 1.4016, where I recommend taking profits. It is hardly possible to count on a more active growth of the pound above the 1.4016 level today. In case the GBP/USD falls and traders are not active in the support area of 1.3917 then I recommend postponing long positions immediately to rebound from a low like the 1.3863 area, from where you can count on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
The bears need to think of a way to regain support at 1.3917, such a scenario will interrupt the bullish momentum and return the pair to the horizontal channel, in which it was in this week. It is unlikely that today's UK report on the house price index from Nationwide can return volatility to the market, so surpassing 1.3917 and testing this level from the bottom up creates a good signal to open short positions with the main goal of falling to the support area of 1.3863 , for which a fierce struggle will begin again. Surpassing this range will allow the bears to take control of the market, which will push GBP/USD to a low like 1.3811, where I recommend taking profits. We do not exclude that following the release of the report, the pound will be able to restore its positions back to the resistance area of 1.3970. Forming a false breakout there can create a good entry point into short positions. If the bears are not active at the 1.3970 level: the optimal scenario would be to sell immediately on a rebound from a new local high in the 1.4016 area, counting on a downward correction of 25-30 points within the day.
The Commitment of Traders (COT) reports for April 20 showed an increase in both long and short positions, while the total non-commercial net position remained almost unchanged, as it only slightly decreased from the previous value. The growth in positions indicates that players are returning to the market as they hope that the pound would rise further. However, such high prices are very attractive for the bears, therefore, a sharp increase in short positions was also recorded.
Good fundamental data, which was released last week on the UK economy, once again proves a rather high probability of strong economic growth rates in the second quarter of this year. This will further contribute to the pound's growth in the medium term, so I recommend betting that it would further strengthen against the US dollar. It is important how the market will react to the fundamental reports on the American economy this week, as well as to the Federal Reserve's decision on interest rates - this will be the main one for the pound's succeeding movement along the trend, or for a downward correction. The COT report revealed that long non-commercial positions rose from 52,851 to 61,053. At the same time, short non-commercial positions increased from 27,261 to 35,875, resulting in a non-commercial net position only slightly declining to 25,178, versus 25,590 a week earlier. On the other hand, the closing price jumped to 1.3991 against 1.3753 last week, which indicates an upward potential for the pair.
Trading is carried out in the area of 30 and 50 moving averages, which indicates market uncertainty regarding the succeeding direction.
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.
Volatility has decreased, which does not provide signals to enter the market based on the indicator.
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.