To open long positions on GBP/USD, you need:
Long positions on the pound from yesterday morning did not bring the expected success, although the entry point was formed correctly and one could count on the continuation of the upward trend. I analyzed the deal in detail in yesterday's forecast. Now let's take a look at the 5 minute chart and talk about what happened in the afternoon. We could clearly see that after a breakout of support at 1.3942 and the reverse test of this level from the bottom up, an excellent signal was formed to open short positions in the pound, which quickly enough resulted in the pair falling to the support area of 1.3897, where I recommended taking profits and opening long positions immediately on a rebound. As a result, both movements brought more than 100 points of profit, which made it possible not only to recapture a small negative in the morning, but also to make good money.
The results of yesterday's Bank of England's meeting were not surprising, which led to another sale of the pound. Not without the rapid strengthening of the US dollar against the pound amid the backdrop of rising Treasury yields. The BoE left its key interest rate at 0.10% and the quantitative easing program at 895 billion pounds. Since today will be a calmer day, the bulls can take advantage of this moment and continue pushing for the growth of GBP/USD. The initial task is to protect support at 1.3897, which has already been tested twice recently, so there is very little trust in it. Forming a false breakout there generates a signal to open long positions in hopes to continue the upward trend, and the nearest target will be resistance at 1.3947, which the pair failed to surpass in yesterday's US session. A breakthrough of 1.3947 along with being able to test this level from top to bottom creates another signal to buy the pound in hopes to reach a high like 1.3996, where I recommend taking profits. If traders are not active in the support area of 1.3897, then it would be best to hold back from long positions until the a low like 1.3855 has been tested from where you can buy GBP/USD immediately on a rebound, counting on a correction of 30-35 points within the day. The next major support area is seen around 1.3812.
To open short positions on GBP/USD, you need:
The initial task of the bears is to break and consolidate below support at 1.3897, which they have already tested several times recently. Renewing this level from the bottom up will create a good signal to open short positions in continuing the downward correction with an exit to a low like 1.3855. Support at 1.3812 is still a target, where I recommend taking profit. This level acts as a kind of lower border of a wide horizontal channel, in which the pound has been in for quite a long time. Its breakout creates a new major bearish trend. In case GBP/USD grows in the first half of the day, the task is to protect resistance at 1.3947. Forming a false breakout there will create a new entry point for short positions, counting on continuing the pair's downward correction. If bears are not active in the 1.3947 resistance area, then it would be best not to rush to sell: you can open short positions immediately on a rebound from a high like 1.3996, counting on a downward correction of 30–35 points within the day. The next major area of resistance is seen around 1.4062.
The Commitment of Traders (COT) report for March 9 revealed a reduction in both short and long commercial positions. This time, the closing of long positions became quite strong, which led to a reduction in the positive delta. The main problem for risky assets, which can be attributed to the pound, is still the growth in the yield of US bonds, which provides serious support to the US dollar. However, in the medium term, buyers of the pound will certainly take advantage of this moment to enter the market at more attractive prices. The beginning of quarantine measures in March will continue to provide the main support for the pound, as well as new measures to help the UK population in the fight against the coronavirus pandemic. Long non-commercial positions declined from 65,138 to 61,271. At the same time, short non-commercials declined from 29,056 to 27,360, indicating a succeeding decline for the pair. As a result, the non-commercial net position fell to 33,911 from 36,082 a week earlier. The weekly closing price dropped to 1.3821 against 1.3928. The observed downward correction in the pound will attract new buyers.
Indicator signals:
Moving averages
Trading is carried out below 30 and 50 moving averages, which indicates the bears' attempt to return to the market.
Note: The period and prices of moving averages are considered by the author on the H1 chart and differs from the general definition of the classic daily moving averages on the D1 daily chart.
Bollinger Bands
A breakout of the lower border of the indicator in the 1.3897 area will increase the pressure on the pair. If the pound rises, the upper border of the indicator at 1.3980 will act as a resistance.
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.
