To open long positions on GBP/USD, you need to:
The break of the support level of 1.3680, which occurred in the first half of the day, led to the formation of a sell signal for the pound. Let's look at the 5-minute chart. We see how the bears achieve a consolidation below 1.3680 and even test it from the bottom up, forming a good entry point into short positions. Unfortunately, the signal was not implemented and there was a return to the level of 1.3680, which led to the fixing of losses.
Given the nature of the market, when there is no fundamental data, it is difficult to assume what further direction the British pound will choose. To enter long positions from the level of 1.3680, you need to test this area from top to bottom. I have highlighted the test zone on the graph. In this case, we can expect the resumption of the upward movement to reach a maximum of 1.3733. A break and test of this level will lead to a more powerful bullish impulse, which can open the GBP/USD to new highs in the area of 1.3770 and 1.3805, where I recommend taking the profits. In the case of a repeated return of the pound to the level of 1.3680 and the lack of active actions on the part of buyers, it is best not to rush into purchases, but to wait for the update of the support of 1.3636, from where you can open long positions immediately on the rebound to move up by 20-25 points within the day.
To open short positions on GBP/USD, you need to:
The bears took control of the market, however, it was not possible to achieve a quick continuation of the pound's fall below the level of 1.3680. As a result, the control was lost and the initial task of the sellers is to break through and consolidate below 1.3680. Only a test of this level from the bottom up (by analogy with the morning trade, which I analyzed above) forms an excellent signal to sell the pound with the main goal of reducing to the area of 1.3636. A further goal will be a minimum of 1.3685, where I recommend fixing the profits. However, to reach the support of 1.3685, the bears need to overcome the lower boundary of the descending channel, which is formed from the maximum of January 21. In the scenario of growth of GBP/USD in the second half of the day, do not rush to sell. The best option is to form a false breakout at the level of 1.3733. If there is no activity at this level, I recommend selling the pound immediately for a rebound from the high of 1.3770, based on a downward correction of 25-30 points within the day.
Let me remind you that in the COT reports (Commitment of Traders) for January 12, the growth of long and short positions was recorded, but the first ones turned out to be more, which led to an increase in the delta. Long non-profit positions rose from the level of 35,526 to the level of 47,935. At the same time, the short non-profit increased from the level of 31,861 to the level of 34,993. It can be seen that there were much fewer sellers than there were new buyers. As a result, the non-profit net position rose to 12,942, against 3,665 a week earlier. All this suggests that traders continue to bet on the strengthening of the pound even in the face of a new strain of COVID-19, for which there is no vaccine yet. The demand for the pound is limited by quarantine measures in the UK, which will be lifted sooner or later after the situation with infections has stabilized. The recent failure of the Bank of England from the introduction of negative interest rates and the pound earlier this year – all of it brought many large and medium customers to rely on the continuation of the bull market this spring.
Signals of indicators:
Moving averages
Trading is conducted in the area and 50 daily averages, which indicates the lateral nature of the market.
Note: The period and prices of the moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger Bands
A break of the upper limit of the indicator in the area of 1.3715 will lead to a new wave of growth. A break of the lower limit of the indicator in the area of 1.3665 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. The graph is marked in yellow.Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.MACD indicator (Moving Average Convergence / Divergence - moving average convergence / divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9Bollinger Bands (Bollinger Bands). Period 20Non-profit 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 the short and long positions of non-commercial traders.