GBP/USD: plan for the European session on April 13. COT reports. Bears are fighting back at 1.3770 resistance, but the pound still has a chance to rise

To open long positions on GBP/USD, you need:

Several signals to enter the market were formed yesterday afternoon, which made it possible to compensate for the losses in the first half of the day. Let's take a look at the 5-minute chart and analyze the trades: you can clearly see that after forming a false breakout at the 1.3770 level, where I recommended selling the pound, a good market entry point was formed. As a result, the pair quickly fell to the support area of 1.3734, where another signal was formed - but this time to buy the pound. Forming a false breakout enabled us to enter long positions, but this did not cause the pound to sharply rise. Let me remind you that in the first half of the day, the bears formed an excellent false breakout at the 1.3711 level, which resulted in creating a signal to sell the pound. However, to my regret, a downward movement did not take place, and after a short pause, the bulls rose above 1.3711, removing all stop orders. Immediately after that, a reverse test of this level took place, which resulted in creating a signal for you to open long positions in continuing the upward trend.

Before examining the technical picture of the pound, let's take a look at what happened in the futures market. There is still quite a lot of confusion, as judging by the indicators, trades are increasingly resorting to a wait-and-see position. The Commitment of Traders (COT) for April 6 revealed that long positions decreased and short ones increased, while the total non-commercial net position fell. Bears have been actively selling the pound last week amid a tense Brexit situation, which led to riots in Ireland by the end of the week. Good fundamental reports on the UK economy that came out last week resulted in a high surge in volatility, afterwards the pair continued to fall. However, investors and economists believe that the UK economy is recovering and it is gaining quite good momentum. This will support the pound this summer. Meanwhile, at the Bank of England, the controversy over changes in monetary policy has long been growing, as additional inflation problems emerge as the economy grows and this will have to be addressed. Those who wish to buy the pound should take a closer look at the market, since there are quite good prices now, which may not be available in the near future.

So: long non-commercial positions fell from 47,222 to 45,270. At the same time, short non-commercial positions rose from 22,263 to 25,219, which indicates that bears are trying to control the market in the short term. As a result, the non-commercial net position fell to 19,951 from 21,819 a week earlier. On the contrary, the weekly closing price rose to 1.3913 from 1.3774.

Today we are expecting a fairly large number of fundamental reports that may affect the pound's direction in the short term. Focus will be on reports on changes in GDP for February and changes in industrial production in the UK. Good reports can cause the pound to rise. Therefore, the bulls will focus on surpassing resistance at 1.3773 in the first half of the day, beyond which it was not possible to get out of yesterday. A breakthrough and consolidation above this level along with a test from the bottom up will only strengthen the pound's position, which will result in continuing the upward correction to a high of 1.3825, where I recommend taking profits. The next larger resistance area is seen around 1.3876. In case GBP/USD falls in the first half of the day, buyers must protect support at 1.3723, where the moving averages pass, playing on the side of the bulls. Forming a false breakout there creates an excellent signal for you to enter long positions as GBP/USD continues to rise to the resistance of 1.3773. If bulls are not active in the support area of 1.3723, then it is best not to rush into long positions: the best option would be to open longs immediately on a rebound from a large local low at 1.3682, counting on an upward correction of 25-30 points within the day. The next big support is seen at 1.3639.

To open short positions on GBP/USD, you need:

The bears' initial task is to regain control of support at 1.3723, which they lost yesterday morning. Since bulls currently have the advantage, the pair should surpass and settle below the mentioned level and test it from the bottom up, as this can create a good signal to open short positions in hopes of returning to a low like 1.3681, where I recommend taking profits. The next target will be this area, as the succeeding bearish trend that formed last week depends on it. Surpassing this level would open a straight path to the 1.3639 low. However, before counting on such a sharp decline from the pound, the bears will need to cope with the moving averages passing just above support at 1.3723. In the event of a further upward correction in GBP/USD in the first half of the day, then it is best not to rush to sell: you need to wait for a false breakout to form in the area of the 1.3773 high and only after that should you open short positions in order to resume the bear market. If bears are not active in this range, then the best option would be to open short positions immediately on a rebound from the high of 1.3825, counting on a downward correction of 25-30 points within the day. The next major resistance is seen at 1.3876.

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates an attempt by the bulls to return to the market and continue the upward correction 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.

Bollinger Bands

A breakout of the upper border of the indicator in the area of 1.3760 will lead to a new wave of growth for the pound. Surpassing the lower border of the indicator in the area of 1.3723 will increase the pressure on the pair.

Description of indicators