Yesterday, a few entry signals were made. Let's take a look at the M5 chart to get a picture of what happened. In the previous review, we focused on the mark of 1.2177 and considered entering the market there. Growth and a false breakout through the level, following the bears' attempts to reach the weekly low, produced a sell signal. The pair plunged by over 40 pips. In the course of the North American session, the pair retested the mark of 1.2160 to the upside, which created a sell entry point, and the price plummeted by another 60 pips.
When to go long on GBP/USD:
The pair is still trading sideways due to the absence of any macro releases. Rare fluctuations have a negative effect only on speculators' stop orders, while the general market situation remains the same. Today, the UK will see the release of data on public net borrowing and CBI distributive trades. These figures have nothing to do with the forex market. Therefore, they are unlikely to somehow affect the pair. For that reason, it is wiser to go long after a false breakout through the nearest support level of 1.2152, which is in line with the bullish moving averages. The quote may then go to the resistance level of 1.2219, which is also the upper limit of the channel. It is important that the bulls break through the mark and consolidate above it as this will allow them to push the pair to 1.2301. If the pair tests this level, this will mean that major players have returned to the market. The quote will rise to 1.2350, where it is wiser to lock in profits, in case of a downside retest of this level. However, if the bulls fail to maintain control over 1.2152, it will become possible to go long after a false breakout through 1.2087, the lower limit of the channel. GBP/USD could be bought on a rebound from 1.2009, allowing a correction of 30 to 35 pips intraday.
When to go short on GBP/USD:
The bears are still unsuccessfully trying to update weekly lows. Due to the current sideways trend, it is wiser to sell the instrument as higher as possible. A false breakout through the nearest resistance level of 1.2219 will generate a sell signal with the target at 1.2152, which is in line with the moving averages. A breakout and a retest of this mark to the upside will create a sell entry point with the target at 1.2087. The most distant target stands at 1.2009 where it is wiser to lock in profits. In case of growth in GBP/USD and the absence of the bears at 1.2219, the bulls will tighten their grip on the market. A sell entry point will form after a false breakout through 1.2301. If there is no trading activity there, GBP/USD could be sold on a rebound from 1.2350, allowing a bearish correction of 30 to 35 pips intraday.
Commitments of Traders:
The COT report for December 13th logged a rise in long and short positions. Given that the number of long positions exceeds that of short positions, the pair is now facing strong buying pressure. In fact, traders are ready to buy the pair at the current high price. Last week, the Bank of England announced it would continue hiking rates to fight stubborn inflation, which slowed down a bit last month. The regulator's policy makes experts think that the UK economy is in a recession. Therefore, the pair's growth potential is likely to be limited. For that reason, it is wiser to wait for a downward correction in order to buy the instrument. According to the latest COT report, short non-commercial positions rose by 1,015 to 57,747 and long non-commercial positions grew by 3,469 to 32,008. Consequently, the non-commercial net position came in at -25,739 versus -28,193 a week ago. The weekly closing price of GBP/USD increased to 1.2149 versus 1.1958.
Indicator signals:
Moving averages
Trading is carried out in the range of the 30-day and 50-day moving averages, reflecting a sideways trend in the market.
Note: The period and prices of moving averages are viewed by the author on the hourly chart and differ from the general definition of classic daily moving averages on the daily chart.
Bollinger Bands
Resistance stands at 1.2185, in line with the upper band.
Indicator description:
Moving average (MA) determines the current trend by smoothing volatility and noise. Period 50. Colored yellow on the chart.Moving average (MA) determines the current trend by smoothing volatility and noise. Period 30. Colored green on the chart.Moving Average Convergence/Divergence (MACD). Fast EMA 12. Slow EMA 26. SMA 9.Bollinger Bands. Period 20Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements.Long non-commercial positions are the total long position of non-commercial traders.Non-commercial short positions are the total short position of non-commercial traders.Total non-commercial net position is the difference between the short and long positions of non-commercial traders.