To open long positions on GBP/USD, you need:
Yesterday, only one signal was formed to sell the pound in the first half of the day, which turned out to be unprofitable. Let's take a look at the 5-minute chart and figure out what happened. In my morning forecast, I paid attention to the level of 1.3536 and advised you to make decisions on entering the market. Growth and the formation of a false breakout at this level in the first half of the day resulted in creating a sell signal for the pound, but it was not possible to achieve a larger downward correction. As a result, losses were recorded on the transaction and the pound continued its upward correction against the US dollar. There were no signals to enter the market in the afternoon.
Today is quite an important day for us and many are counting on an interest rate increase from the Bank of England, which will increase the British pound's appeal. However, it should be understood that the planned increase has already been taken into account in the quotes, and if the central bank does not announce anything new in its summary, the pound may even plunge. It is very important that BoE Governor Andrew Bailey speaks out more aggressively regarding further monetary policy – this will be a catalyst for the pound's growth.
An important task for today is to protect the support of 1.3537, where the moving averages are playing on their side. From this range, we can count on the continuation of the upward correction for the pair. It is important to form a false breakout at 1.3537. Only this will create the first entry point into long positions, and good data on the PMI index for the UK services sector will return demand for the British pound. An equally important task is to break through and test 1.3582 from top to bottom, which will provide another buy signal with the goal of returning to 1.3622. A more difficult task is to update the 1.3656 area, but this will clearly happen only in case of aggressive changes in the central bank's policy after today's meeting. I recommend taking profits there.
In case GBP/USD falls during the European session after weak fundamental data and lack of activity at 1.3537, it is better not to rush into buying risky assets. I advise you to wait for the test of the next major level of 1.3495. Only the formation of a false breakout will provide an entry point to long positions. You can buy the pound immediately for a rebound from 1.3455, or even lower - from this month's low of 1.3407, counting on a correction of 20-25 points within the day.
To open short positions on GBP/USD, you need:
The bears remain on the sidelines and will obviously closely monitor the results of the BoE meeting. A lot will depend on the degree of hawkish policy, so no one will sell the pound even from the current highs yet.
The primary task is to protect the 1.3582 level, where the bullish momentum was stopped yesterday. Forming a false breakout in this range, along with the divergence that is being formed now on the MACD indicator, all this creates the first entry point into short positions, counting on the resumption of the bear market and the pair's decline to the intermediate support area of 1.3537, formed by yesterday's results. A breakdown and a test of 1.3537 from the bottom up will provide another entry point for short positions on the pound with the goal of falling to 1.3495 and 1.3455, where I recommend taking profits.
If the pair grows during the European session and bears are weak at 1.3582, and good data on the UK composite PMI will be a good sign of stable economic growth - then it is best to postpone short positions until the next major resistance at 1.3622. I also advise you to open short positions there only in case of a false breakout. It is possible to sell GBP/USD immediately for a rebound from 1.3656, or even higher - from the high in the area of 1.3697, counting on the pair's rebound down by 20-25 points within the day.
I recommend for review:
The Commitment of Traders (COT) report for January 25 showed that short positions increased and a sharp reduction in long ones. All this has led to a return of the market to the bears' side, but this week the situation may change dramatically. As the bears did not try to continue the downward trend, it turned out quite badly. The bears were not helped by the Federal Reserve's statements after the monetary policy meeting that the central bank would start raising interest rates in the United States in March. Most likely, the demand for the pound will gradually recover, as a meeting of the Bank of England committee will be held this Thursday, at which it will be decided to raise interest rates. However, the pressure on the pound will remain due to the observed fundamental picture, which creates a number of more serious moments limiting the upward potential. However, if you look at the overall picture, the prospects for the British pound look pretty good, and the observed downward correction makes it more attractive. In any case, the BoE's decision to raise interest rates further this year will push the pound to new highs. The COT report for January 25 indicated that long non-commercial positions decreased from the level of 39,760 to the level of 36,666, while short non-commercial positions increased from the level of 40,007 to the level of 44,429. This led to a drop in the negative non-commercial net position from -247 to -7,763. The weekly closing price dropped from the level of 1.3647 to the level of 1.3488.
Indicator signals:
Trading is conducted above the 30 and 50 moving averages, which indicates continued growth of the pound in the short term.
Moving averages
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
A breakthrough of the upper limit of the indicator in the area of 1.3582 will lead to an increase in the pound. Crossing the lower limit in the 1.3540 area will increase the pressure on the pair.
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.
