GBP/USD: plan for the US session on April 14 (analysis of morning trades)

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

In my morning forecast, I paid attention to the resistance of 1.3773 and recommended that we act on it. Let's look at the 5-minute chart and talk about what happened. It is visible how the bulls achieve a breakdown of the level of 1.3773, after which there is active growth of the pound. Unfortunately, it was not possible to wait for the reverse test of this area from the bottom up, since, at the first correction, 5 points were missing before the update. So I was forced to skip the entire morning growth. After a while, the bears managed to regain control of the level of 1.3773 and even tested it from the bottom up, which led to the formation of a sell signal for the pound. At the time of writing, the downward movement was more than 20 points.

Given that from a technical point of view, nothing much has changed, except for an unsuccessful consolidation above the level of 1.3773, the strategy for the US session remains the same: the bulls will focus on another breakout and consolidation above the resistance of 1.3773, and only a confident test of this level from top to bottom will only form a signal to enter the market, which can lead to the continuation of the morning upward correction of the pair to the area of the maximum of 1.3825, where I recommend taking the profit. The next larger area of resistance is seen around 1.3876, however, it will only be available in the event of a bullish market reaction to the speech of Federal Reserve Chairman Jerome Powell. In the event of a decline in GBP/USD in the afternoon, all buyers need is to protect the support of 1.3723, which they managed to do all day yesterday. The formation of a false breakout there forms an excellent signal to enter long positions to return GBP/USD to the resistance of 1.3773. In the scenario of no bull activity in the support area of 1.3723, it is best not to rush to buy: the best option is to open long positions immediately on the rebound from the large local low of 1.3682, based on an upward correction of 25-30 points within the day. The next major support is seen in the area of 1.3639.

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

The sellers of the pound have already coped with their initial task and returned the pair to the level of 1.3773, which keeps the market under their control. While trading will be conducted below this range, we can expect a decline in GBP/USD to the support area of 1.3723. Only a break and consolidation below this range with a test of it from the bottom up will form a good signal to open short positions in the expectation of a return to the minimum of 1.3681. In a larger fall of the pair after the speech of the Fed chairman, a break of 1.3681 will open a direct path to the minimum of 1.3639, where I recommend taking the profits. In the scenario of an upward correction of GBP/USD, it is best not to rush to sell: you need to wait for the formation of a false breakout near the maximum of 1.3773 and only then open short positions to resume the bear market. In the scenario of a lack of activity on the part of bears in this range, the best option is to take short positions immediately on a rebound from the maximum of 1.3825, based on a downward correction of 25-30 points within the day. The next major resistance is seen in the area of 1.3876.

Let me remind you that the COT reports (Commitment of Traders) for April 6 recorded a reduction in long positions and an increase in short ones, while the total non-commercial net position decreased. Bears actively sold the pound all last week against the background of the tense situation with Brexit, which by the end of the week led to mass riots in Ireland. The good fundamental data that was released on the UK economy last week only led to a high spike in volatility, after which the pair continued its decline. However, investors and economists remain confident that the UK economic recovery is gaining quite a good momentum, which will support the British pound in the summer of this year.

The Bank of England has long been increasingly divided over changes in monetary policy, as the economy grows, there will be additional problems with inflation, which will need to be responded to. Those who are counting on buying the pound should take a closer look at the market since now there are quite good prices, which may not be available in the near future. Thus, long non-profit positions have declined from the level of 47,222 to the level of 45,270. At the same time, short non-profit prices rose from the level of 22,263 to 25,219, indicating an attempt to control the market by sellers in the short term. As a result, the non-profit net position fell to 19,951 from 21,819 a week earlier. The weekly closing price, on the contrary, rose to 1.3913 from 1.3774.

Signals of indicators:

Moving averages

Trading is conducted in the area of 30 and 50 daily averages, which indicates a possible attempt by bears to return to 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

In the case of a decline in the pair, the lower limit of the indicator in the area of 1.3730 will provide support. If the pound rises, the upper limit of the indicator in the area of 1.3795 will act as a resistance.

Description of indicators