FX.co ★ GBP/USD: plan for the European session on May 10. COT reports. Pound surges after US labor market report and will continue to rise

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

Quite a lot of good signals to enter the market were formed last Friday. Let's take a look at the graph and break them down. In the first half of the day, a good report on activity in the construction sector and speeches by representatives of the Bank of England did little to help buyers, which only made it possible for the pound to get close to resistance at 1.3921. A false breakout on it created a signal to open short positions, which then led to a sell-off in GBP/USD, allowing about 35 points to be taken from the market. The pair sharply rose above the resistance of 1.3921 following the release of the US labor market report. In my afternoon forecast, I advised you to open short positions immediately on a rebound from resistance 1.3970, which is what happened. The downward movement was around 50 points. The reverse test from top to bottom level 1.3921 also created a signal to open long positions in sustaining the pair's growth, which quickly brought the pound back to resistance at 1.3970, and then to a new high at 1.4016.

Now the bulls have confidently settled above the level of 1.4016 and are hoping to surpass 1.4062. Rising above this range with a test from top to bottom can create a good entry point to long positions in hopes of continuing the bullish trend and an exit to highs like 1.4115 and 1.4179, where I recommend taking profits. Since important fundamental reports will not be released today, then it is possible to form a downward correction. In this scenario, the first support level will be the area of 1.4016. Forming a false breakout there will be an excellent signal to open new long positions in continuation of the pound's growth. If bulls are not active there, which is unlikely, then I recommend postponing long positions immediately to rebound from a larger low like 1.3970, counting on an upward correction of 20-25 points within the day. There are also moving averages, playing on the bulls' side.

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

At the moment, the bears need to think of a way to protect resistance at 1.4062, to which the bulls are gradually pulling the pair. Considering that it is always a bad idea to trade against the trend, forming a false breakout in the area of 1.4062 creates a signal to open short positions as we count on a downward correction to support 1.4016. Surpassing this level will quickly push the pound to a low of 1.3970, where I recommend taking profits, since there are moving averages, which will surely rebound to the upside upon the first test. If the bears are not active at the 1.4062 level, then I recommend postponing short positions until a new local high like 1.4115 has been updated, from where you can open short positions immediately on a rebound, counting on a downward correction of 20-25 points within the day. The next major resistance is seen around 1.4179.

The Commitment of Traders (COT) report for April 27 revealed that both long and short positions have decreased, while the total non-commercial net position increased. How it happened - let's figure it out. Last week, we did not see any important fundamental statistics from the UK, so everyone was focused on the European Parliament vote on Brexit, the results of which supported the pound. Also, the speeches of the British Prime Minister and the possible earlier lifting of all quarantine restrictions in Britain enabled the bulls to adhere to their scenario to strengthen the pair. All this will contribute to growth in the medium term, so I recommend betting that the pound would strengthen further against the US dollar. Any good downward correction is another reason to think about buying the pound, since the prospect of a recovery in the UK economy in the summer gives rise to a lot of optimism. The COT report revealed that long non-commercial positions declined from 61,053 to 59,917. At the same time, short non-commercials fell from 35,875 to 30,699, causing the non-commercial net position to rise to 29,218 against 25,178 a week earlier. Closing short positions once again points to the fact that the pound has a huge potential to grow. Last week's closing price also slightly dropped to 1.38947 against 1.39915.

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates the formation of an upward trend 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

Surpassing the upper border of the indicator in the area of 1.4075 will lead to a new wave of growth for the pound. In case the pair falls, support will be provided by the average border of the indicator in the area of 1.4005.

Description of indicators

• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
• MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-commercial 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 short and long positions of non-commercial traders.