FX.co ★ GBP/USD: plan for the US session on March 12 (analysis of morning trades)

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

In my morning forecast, I advised you to pay attention to the level of 1.3928 and make decisions on entering the market from it. Let's look at the 5-minute chart and analyze the entry points. The contraction of the UK economy in January this year hit the positions of the British pound, and several weak fundamentals once again confirmed the existence of problems due to COVID-19. The breakout of the support of 1.3928 did not lead to the formation of a false breakout, which crossed out the plans to enter long positions. I also did not wait for the reverse normal test from the bottom up of the level of 1.3928, before the next wave of decline, which forced me to ignore the entry point to short positions.

In the second half of the day, the technical picture has completely changed. In the case of a decline in the pound after the release of data on the US economy, only the formation of a false breakdown in the support area of 1.3882 forms an entry point into long positions to continue the upward correction of the pair. In the event of a rise in the pound, the nearest target for the bulls will be the resistance of 1.3942. Only a breakout and consolidation above this level will form the entry point to long positions in the expectation of a return to the daily maximum in the area of 1.4000, where I recommend taking the profits. In the scenario of a decline in the pound in the second half of the day and a lack of activity in the area of 1.3882, it is best not to rush to buy: the optimal scenario under this condition will be buying GBP/USD immediately rebound from the large support of 1.3830 in the expectation of an upward correction of 25-30 points within the day.

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

The initial task of the bears is to maintain control over the resistance of 1.3942. Only the formation of a false breakout in the second half of the day forms a new entry point into short positions in the continuation of the downward correction of the pair. The target of the bears, in this case, will be the support of 1.3882, where I recommend fixing the profit. An equally important goal will be a breakout and a test of this level from the bottom up, which will form an additional entry point into short positions to return to the minimum of 1.3830. If there is no bear activity in the resistance area of 1.3942 and poor macroeconomic indicators in the US, it is best not to rush to sell: you can open short positions immediately on a rebound only from the maximum of 1.4000, based on a downward correction of 30-35 points within the day. The next major resistance area is seen around 1.4062.

Let me remind you that the COT reports (Commitment of Traders) for March 2 recorded a reduction in both short and long commercial positions. The closing of short positions turned out to be stronger, which led to an increase in the positive delta. And although the rise in US bond yields is providing serious support to the US dollar at the moment, in the medium term, buyers of the pound can only take advantage of the moment of correction of the pair to enter the market at more attractive prices. The expectation of curtailing quarantine measures in March this year will support the pound, as will new measures to help the UK population fight the coronavirus pandemic, which was recently announced by Finance Minister Rishi Sunak. Long non-profit positions fell from the level of 68,266 to the level of 65,138. At the same time, short non-profit positions fell from the level of 37,288 to the level of 29,056, which maintains good prospects for the continued growth of the pound. As a result, the non-profit net position rose to 36,082 from 30,978 a week earlier. The weekly closing price was 13928 against 1.4067. The observed downward correction in the pound will attract new buyers.

Signals of indicators:

Moving averages

Trading is just below 30 and 50 daily averages, indicating that the bears are trying to regain control 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

In the case of a rise in the pound, the average border of the indicator in the area of 1.3965 will act as a resistance.

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 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-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.