To open long positions on GBP/USD, you need:

Yesterday, the British pound continued to sharply grow after breaking out of the horizontal channel, which it had been in for quite a long time. Let's take a look at the 5 minute chart and figure out what happened. Even in the first half of the day, it is clear how the bulls are trying to surpass the 1.4062 range on the second attempt, and then a reverse test from top to bottom takes place, which will ensure that there is a large buyer who has occupied this level. After that, the pound rises to the area of the target value of 1.4115, where there is only a small profit-taking. Forming a false breakout there did little to help the bears, therefore, after a slight downward correction, the bulls achieved a breakthrough and consolidation above this resistance, keeping the market under their control by the end of the day.

Before examining the technical picture of the pound, let's take a look at what happened in the futures market. And although there are no major changes there, you need to understand what is happening with the positions of major players. The COT reports (Commitment of Traders) for May 4 showed that long positions decreased and short ones have increased. However, the report does not take into account Friday's market changes, when the British pound showed a large increase. Last week, we all followed the Bank of England's decision on interest rates, so traders feared for the pound's succeeding growth, building up short positions. Keeping monetary policy unchanged had limited the pound's growth potential, but hints from the committee members that it is time to think about curtailing stimulus programs breathed new strength into the bulls. A disappointing report on the US labor market will continue to weigh on the dollar for a long time at any opportunity. Therefore, the trend for strengthening the British pound will continue. The prospect of a recovery in the UK economy in the summer, when all quarantine restrictions will be lifted, also causes a lot of optimism and helps the bulls find excuses to build up their positions.

The COT report indicated that long non-commercial positions declined from 59,917 to 52,262. At the same time, short non-commercial positions rose from 30,699 to 32,414, causing the non-commercial net position to decline to 19,848 versus 29,218 a week earlier. But the price rose to 1.39033 against 1.38947 at the end of the last week.

The bulls' main task for today is to keep support at 1.4108 under their control. Forming a false breakout at this level creates another signal to open long positions in continuation of the bull market that we have been observing since the end of last week. In such a scenario, one can count on an update and a test of resistance at 1.4155, rising above which will not be so easy. The main reason for this is the divergence, which is now forming on the MACD indicator and limits the pair's growth potential. If the bulls manage to rise above this range and test it from top to bottom, then you can safely open new long positions in continuation of the bullish trend in hopes of updating a high like 1.4201, where I recommend taking profits. The next big resistance is at 1.4241. If the bulls are not active in the support area of 1.4108, then it is best not to rush into long positions. The optimal scenario would be long positions immediately on a rebound from a support like 1.4062, or even lower - from the level of 1.4016, counting on an upward correction of 25-30 points within the day.

To open short positions on GBP/USD, you need:

The bears have already set their sights on support at 1.4108 to which they have one step left. This could be Bank of England Governor Andrew Bailey's speech. If he does not raise the topic of scaling down stimulus programs, then the pound could correct, especially given the problems that are developing due to Brexit in Ireland. A breakthrough and consolidation below the level of 1.4108 with a reverse test of it from the bottom up can create a good entry point to short positions in hopes of returning the pair to the area of 1.4062, where the moving average, which plays on the bulls' side, passes. The next target will be the level of 1.4016, where I recommend taking profits. If the pound grows during the European session, then the best option for opening short positions will be when a false breakout is formed in the resistance area of 1.4155. If there is no bearish activity, then it is best to postpone short positions until a large local high in the 1.4201 area is renewed, counting on a downward correction of 20-25 points within the day.

Indicator signals:

Trading is carried out above 30 and 50 moving averages, which indicates that the pound will continue to rise in the short term.

Moving averages

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.

Bollinger Bands

Surpassing the lower boundary at 1.4108 will lead to a new wave of decline for the pair. Surpassing the upper border of the indicator around 1.4155 will lead to a continuation of the bullish trend.

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.