To open long positions on GBP/USD, you need:
In yesterday's afternoon review, I paid attention to the longs that appeared after forming a breakout and settling above the 1.2843 range. This entry point is clearly visible on the 5-minute chart, which brought more than 70 points of profit. But I also recommended opening short positions in the pound immediately on the rebound from the resistance of 1.2921, which happened. As a result, it was possible to take another 70 points, since the price only stopped falling at the middle of the side channel at 1.2843. Unfortunately, you do not have to pay attention to this level today, since it is completely vague. It is best to act from the upper and lower border of the sideways channel. Buying will only be relevant after GBP/USD falls to the support area of 1.2777, where it is best to wait for a false breakout to appear, since going against the trend is not the best idea. In case bulls are not active and we receive weak reports on the state of the UK labor market, this will be released at the beginning of the day, I recommend postponing long positions until the low of 1.2725 has been tested or even lower, until larger support levels of 1.2675 and 1.2645 have been updated, counting on a correction of 30-40 points within the day.
An equally important task for the pound buyers is to break through the area and settle above the resistance of 1.2921, as this will open up a real opportunity for an upward correction to form in the area of highs 1.2991 and 1.3103, which is where I recommend taking profits. Let me remind you that very important changes have taken place in the futures market. The Commitment of Traders (COT) reports for September 8 showed that long positions decreased, but in addition, short positions sharply dropped, which indicates profit taking after a fairly large bear market that we saw recently. This is also evidence that downward momentum may begin to gradually slow down, but much will depend on the terms of the Brexit deal. Short non-commercial positions decreased from 42,901 to 33,860 during the reporting week. Long non-commercial positions slightly fell from 49,213 to 46,590. As a result, the non-commercial net position increased to 12,730 against 6,312 a week earlier.
To open short positions on GBP/USD, you need:
But don't forget that the market is under pressure from a new Brexit bill that is currently under consideration in the UK Parliament. Any negative news in this regard will lead to a new wave of decline for the pound. You can consider sell positions after consolidating below the middle of the 1.2843 channel, but it is necessary to test this level from the bottom up to make sure that a seller is present on it. In this scenario, retesting 1.2777 may lead to a breakout for this level, below which you can also open short positions and wait until lows of 1.2725 and 1.2675 have been updated, which is where I recommend taking profits. A low of 1.2645 will be the long term goal. However, a more rational approach to opening a short in this situation, like yesterday, will be on the pound's growth. However, before opening short positions from the resistance of 1.2921, you need to wait until a false breakout appears. Selling immediately on a rebound will only be relevant from the 1.2991 level in the hopes of returning the pair to the middle of the side channel of 1.2843, by the way, this is where the lower border of the new upward correction channel (green on the chart) passes, which can be broken at any time.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50 moving averages, which indicates a pause in the active actions of both buyers and sellers.
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
A breakout of the lower border of the indicator in the 1.2830 area will lead to a new wave of decline for the pound. A breakout of the upper border of the indicator in the 1.2885 area will cause the pair to rise.
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. The MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages). Quick EMA period 12. Slow EMA period to 26. The 9 period SMA. Bollinger Bands (Bollinger Bands). The 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.