To open long positions on GBP/USD, you need:
Since bulls on the pound did not try to build a new upward correction in the first half of the day, nothing good came of it. The bears returned during the US session, generating several signals to open short positions. Let's take a look at the 5 minute chart and see what happened. In my morning forecast, I paid attention to the 1.3678 level and advised you to make decisions on entering the market. A rather interesting situation occurred where two different signals were formed at the same level. During the first test of resistance at 1.3678, a false breakout was formed, which resulted in creating a signal to sell the pound further along the trend. However, the pair did not significantly fall, and after going down 13 points, the demand for the pound returned. After some time, a breakthrough and reverse test of 1.3678 from top to bottom took place, which resulted in creating a buy signal, but even here the bulls failed to offer anything against the trend. During the US session, a breakthrough and reverse test of 1.3664 formed an excellent entry point for short positions, which pushed the pound to fall by 25 points. A similar formation closer to the end of the day pushed the pound down by only 10 points.
No important data on the UK today, so the focus will shift to the results of the Federal Reserve's two-day meeting on monetary policy. We'll talk more about it in the afternoon forecast. In the meantime, bulls on the pound need to do their best to prevent a breakdown of the important local low of 1.3642. Only a false breakout there can generate a signal to open long positions against the trend, which will lead to an upward correction to the area of the intermediate resistance at 1.3674. Considering that there are no fundamental reports today, it is unlikely for the bulls to rise above this range so easily. Only a test of this level from top to bottom can create another entry point into long positions in hopes of stopping the bearish trend and with the goal of returning to the level of 1.3713. The succeeding target will be the 1.3752 high, where I recommend taking profits. If the pressure on GBP/USD persists in the first half of the day, and the bulls are not active in the support area of 1.3642, it is best not to take risks with long positions against the trend. The optimal scenario would be to buy the pound from the level of 1.3603, but only after forming a false breakout. I advise you to open long positions in GBP/USD immediately on a rebound in the 1.3552 area, or even lower - from 1.3530, counting on an upward correction of 15-20 points within the day.
To open short positions on GBP/USD, you need:
The initial task of the bears is to protect the resistance at 1.3674, which bulls will be focusing on in the first half of the day. The absence of fundamental statistics on the UK will play into the hands of the bears, therefore, forming a false breakout at 1.3674 will weaken the pound's position and push the pair to an important support at 1.3642, which has been sought after for the third day. A breakthrough and test of this area from the bottom up will create another entry point into short positions, which will push GBP/USD even lower – to 1.3603, and there it is close to the 1.3562 low, where I recommend taking profits. In case there are active short positions on the pound, a low like 1.3530 will be a long-term target. If the bears are not active around 1.3674 in the first half of the day, I advise you to postpone the short position to a new large resistance of 1.3713. I also recommend opening short positions from there only if a false breakdown is formed. You can sell GBP/USD immediately on a rebound from the high in the area of 1.3752, counting on a downward correction of 25-30 points within the day.
I recommend for review:
The Commitment of Traders (COT) reports for September 14 revealed a sharp positive dynamics in net position and a rather large inflow of long non-commercial positions along with a decrease in short ones. And although the British pound remains under pressure against the US dollar, the clear decline in the trading instrument indicates a rather high interest in long positions on the part of major players. It is possible that the sharp rise in inflation in the UK forced many traders to reconsider their attitude towards the Bank of England's monetary policy in the direction of its possible tightening. However, the fact that BoE representatives are in no hurry to talk about these changes affects the activity of traders. I advise you to continue with the strategy of buying the pound in case of any good decline. The lower the pound falls, the more active buyers of risky assets will begin to show themselves, betting on real changes in the BoE's monetary policy in the future. The COT report indicated that long non-commercial positions sharply rose from 29,348 to 44,161, while short non-commercial positions fell 53,872 to 39,371, indicating an advantage towards buyers of the pound and offsetting the market situation. As a result, the non-commercial net position returned to a positive value and rose from -24,524 to 4,790 a week earlier. Last week's closing price remained practically unchanged and reached 1.3837 against 1.3838 a week earlier.
Trading is carried out below 30 and 50 moving averages, which indicates the formation of a downward trend for the pair.
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.
A breakthrough of the lower border of the indicator in the area of 1.3642 will lead to a new wave of decline in the pound. Surpassing the upper border of the indicator in the area of 1.3680 will lead to a new will of the pound's growth.
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.