To open long positions on GBP/USD, you need:
Yesterday, pound bulls managed to protect the important support at 1.3192, but the situation for them has not improved in any way - only one step separates them from a new major fall. Let's take a look at the 5 minute chart and see what happened yesterday. A breakthrough and consolidation below 1.3245, which is clearly visible on the chart, and then the renewal of this area from the bottom up - all this led to a good signal to sell the pound. As a result, the first downward movement was about 45 points. Even the level 1.3210, which bulls had hoped for, did not help. The pound was under pressure during the US session, and the breakdown of the support at 1.3197 led to another large sale of the pound. Unfortunately, I did not wait for a reverse test of this level from bottom to top, so I had to miss the entry point.
Today there are no important reports on the UK and most likely the pound will continue to trade in a narrow horizontal channel with the prospect of further decline along the trend - the daily update of local lows forces us to adhere to just such a scenario. The bulls need to try very hard to keep the initiative, and this will be done only in case of a false breakout in the area of the lower border of the horizontal channel at 1.3192. In this case, the pound will rise and the 1.3237 average will be tested, where the moving averages, playing on the side of the bears, also pass. Surpassing this level will be a very strong bullish impulse, so the top down test of 1.3237 will provide an additional entry point for buying GBP/USD with the prospect of a breakthrough of 1.3283 closer to the afternoon. A breakdown of this range will also open the possibility of renewing the 1.3329 high, where I recommend taking profits. The next target is the resistance at 1.3368, but it will be quite difficult to reach it without good news. Bulls will face very serious problems in case the pound falls during the European session and traders are not active at 1.3192. For this reason, I advise you to take your time with long positions. Only the formation of a false breakout near the next low of 1.3150 can provide an entry point for long positions. It is possible to buy GBP/USD immediately on a rebound in the area of 1.3111, or even lower - from 1.3070, counting on a correction of 20-25 points within the day.
To open short positions on GBP/USD, you need:
The fact that the bears are not letting the pair rise above the resistance level of 1.3283 indicates that bearish momentum can continue. Yesterday's breakthrough and consolidation below 1.3237 leaves all the chances for the bear market to continue. All that is required now is to protect this level. Forming a false breakout there will lead to creating a new entry point into short positions, followed by a decline to the 1.3192 area. This level was surpassed yesterday, but the bulls quickly returned it. Considering that there are no significant UK reports today, a breakthrough of 1.3192 will create new problems for bulls and keep the pair in a downward trend. A reverse test of this range from the bottom up will provide an excellent entry point, which will push GBP/USD to new lows: 1.3150 and 1.3111, where I recommend taking profits. The next target will be support at 1.3070, but we will fail to reach it if the Bank of England maintains super-soft monetary policy. In case the pair grows during the European session and the bears are not active at 1.3237, it is best to postpone selling until the larger resistance at 1.3283. I also recommend opening short positions there only in case of a false breakout. Selling GBP/USD immediately on a rebound is possible only from a large resistance at 1.3329, or even higher - from a new high in the 1.3368 area, counting on the pair's rebound down by 20-25 points within the day.
I recommend for review:
The Commitment of Traders (COT) reports for November 30 revealed that both short positions and long positions increased. However, there were more of the latter, which led to an increase in the negative delta. Last week there was very little fundamental statistics on the UK economy, and all the speeches of Bank of England Governor Andrew Bailey were dovish, which did not give traders confidence in the future of the British pound. And if the representatives of the BoE preferred to take a more wait-and-see attitude, then the speeches of Federal Reserve Chairman Jerome Powell, on the contrary, were of a hawkish character. In his comments, he spoke quite a lot about the expected changes in monetary policy towards tightening. The reason for this is rather high inflation, which has grown from "temporary" to permanent, which creates many problems for the central bank. An equally serious problem for the UK is the new Omicron coronavirus strain, which could lead to another lockdown and the country's quarantine. So far, the authorities have to closely monitor the development of the situation with the new strain, which negatively affects the economy at the end of this year. Let me remind you that the Fed will hold a meeting next week, at which a decision on the bond purchase program will be made, so demand for the US dollar is expected to remain in the shorter term. The COT report indicated that long non-commercial positions rose from 50,122 to 52,099, while short non-commercials increased from 84,701 to 90,998. This led to an increase in the negative non-commercial net position: delta was -38,899 against -34,579 a week earlier. The weekly closing price dropped from 1.3397 to 1.3314.
Trading is carried out below 30 and 50 moving averages, which indicates a continued bear market.
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 upper border of the indicator in the area of 1.3237 will lead to a new wave of growth of the pound. A breakout of the lower border of the indicator around 1.3190 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.