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When to open long positions on GBP/USD:
Yesterday, several excellent profitable entry signals were formed. Let's turn to the M5 chart to analyze the situation. In my previous analysis, I paid attention to the 1.3190 level and said you should consider entering the market from there. A rise in the pound in the first half of the day ahead of the meeting of the Bank of England (BoE) led to a test of the 1.3190 mark. However, the pair was unable to leave the range on the first try. A strong sell signal was made after a false breakout, and GBP/USD already fell by 45 pips during the European session. It then plunged after the BoE had announced its interest rate decision. A breakout and a retest of the 1.3122 level produced a nice sell entry point. The trading instrument had fallen by more than 30 pips before bulls started to buy out the pound at the lows.
The BoE announced the third rate hike yesterday. At the same time, the tone of the meeting was rather dovish as the regulator expects higher inflation amid the Russia-Ukraine conflict. The monetary policy committee voted 8-1 in favor of a 0.25% rate increase, from 0.50% to 0.75%. Inflation remains one of the primary reasons why the central bank had to take such a step. Despite a plunge after the announcement, the pair was able to recoup recent losses and closed in a new wider sideways channel. Bulls will now try to protect support at 1.3144 during the European session. Both bears and bulls seem to be taking interest in this level. You could go long from there after a false breakout as no fundamentals are expected in the United Kingdom today. Moreover, the BoE's statement keeps weighing on the market. In this light, the pair may rise to the upper limit of the sideways channel at 1.3198. The price failed to break above it yesterday. A breakout and a retest of this range from top to bottom could trigger stop orders of bears, allowing bulls to hit new highs at 1.3244 and 1.3275. The level of 1.3314 stands as a farther target where you should consider taking a profit. However, the price will be able to go there in case of positive news on Russia-Ukraine peace talks. In the event of a fall during the European session and a decrease in bullish activity at 1.3144, in line with the bullish moving averages, long positions could be opened when the price reaches support at 1.3094, in line with the lower limit of the sideways channel. Long positions should be entered there only if there is a false breakout. Long positions on GBP/USD could also be entered immediately on a rebound from 1.3046 or the 1.3003 low, allowing a 30-35 pips correction intraday.
When to open short positions on GBP/USD:
Bearish activity increased by the end of the day after a bearish impulse triggered by the BoE's decision. Bears will try to take control over support at 1.3144, in line with the middle of the sideways channel. A breakout and a retest of this range from bottom to top will make a sell signal, with targets at the 1.3094 and 1.3046 lows where you should consider taking a profit. The 1.3003 mark stands as another target. However, such a plunge could come if the global geopolitical situation changes for the worse. In the event of a rise in the first half of the day, which is highly unlikely, a false breakout at 1.3198 could produce a sell signal and increase the pair's downside potential. In case of a decrease in bearish activity there, short positions could be entered as soon as the price reaches resistance at 1.3244 and only if there is a false breakout. Short positions on GBP/USD could be entered immediately on a bounce from 1.3275 or the 1.3314 high, allowing a 20-25 pips correction intraday.
The US regulator announced a 25 basis points rate hike to tame the highest inflation rate in 40 years. As we know, Russia and Ukraine have agreed to hold peace talks. Nevertheless, no progress has been achieved so far. High inflation in the UK made the BoE act more aggressively. The British regulator held its monetary policy meeting the following day after the Fed. The monetary policy committee voted 8-1 in favor of a 0.25% rate increase, from 0.50% to 0.75%. Despite a plunge after the announcement, the pair was able to quickly recover and closed in a new wider sideways channel. The COT report for March 8 revealed a rise in long non-commercial positions to 50,982 versus 47,679 and an increase in short non-commercial positions to 63,508 from 48,016. The total weekly non-commercial net position decreased to -12,256 versus -337. The weekly closing price fell to 1.3113 from 1.3422.
Indicator signals:
Moving averages
Trading is carried out above the 30-day and 50-day moving averages, showing that bulls are trying to extend the uptrend.
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
The lower band at 1.3105 stands as support. Resistance is seen at 1.3198, 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 20
- Non-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 short and long positions of non-commercial traders.