06.05.202112:49 Forex Analysis & Reviews: GBP/USD: plan for the US session on May 6 (analysis of morning trades)

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

In my morning forecast, I paid attention to the level of 1.3921 and the data on activity in the UK service sector. Let's look at the 5-minute chart and talk about what happened. A good PMI report for the UK services sector helped the British pound to regain its position against the US dollar and get close to the resistance of 1.3921. A lot depends on the decision of the Bank of England. There were no other signals to enter the market, so the strategy for the second half of the day remains the same as for the first.

Buyers need to achieve a breakout of the range of 1.3921, as the pair's further growth depends on it. Fixing above this level and testing it from top to bottom on the volume, together with the decision of the Bank of England to reduce the bond repurchase program, will signal the opening of new long positions in the expectation of continuing the upward trend in April. The primary goal will be growth to the rather significant resistance of 1.3970, where I recommend taking the profit. A further target will be a maximum of 1.4016. If the regulator does not make adjustments to its policy and takes a wait-and-see position, the pressure on the pound may increase. In the event of a decline in GBP/USD, the bulls will have to defend the support of 1.3878, which was formed yesterday. You can act only after the formation of a false breakdown. If there is no activity of GBP/USD at the minimum of 1.3878: I recommend postponing long positions immediately for a rebound from the local support in the area of 1.3839 or even lower - to the test of the minimum of 1.3799, from where you can count on an upward correction of 25-30 points within the day.

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

Sellers can expect a downward correction only if the Bank of England leaves everything as it is and does not signal changes in policy in the near future. In the first half of the day, sellers have already defended the resistance of 1.3921. However, there was no major downward movement from this level. While trading will be conducted below this range, we can count on a larger movement of the pair to the support area of 1.3878, where the bears received a very large rebuff yesterday. If the activity of sellers at the level of 1.3921 is not recorded, and changes in the policy of the Bank of England will lead to an increase in the pair, I recommend postponing sales until the upper limit of the side channel of 1.3970 is updated, from where you can open short positions immediately for a rebound in the expectation of a downward correction of 20-25 points within the day. The next major resistance is seen in the area of 1.4016. An equally important task for the bears will be to break through the support of 1.3878. Fixing below this level with a reverse test of it from the bottom up will lead to the formation of a good entry point into short positions in the expectation of a return of the pair to the area of 1.3839, where I recommend fixing the profit. A more distant target will be the level of 1.3799.

Let me remind you that the COT reports (Commitment of Traders) for April 27 recorded a reduction in both long and short positions, while the total non-commercial net position increased. How it happened - let's figure it out. Last week, we did not see important fundamental statistics for the UK, so all the attention was on the European Parliament's vote on Brexit, the results of which supported the pound. Also, the British prime minister's speeches and the possible earlier lifting of all quarantine restrictions on the territory of Britain allowed buyers of the pound to stick to their scenario for strengthening the pair. All this will continue to contribute to growth in the medium term, so I recommend betting on further strengthening against the US dollar. Any good correction of the pair down is another reason to think about buying the pound, as the prospect of a recovery in the UK economy in the summer period causes quite a lot of optimism. The COT report shows that long non-profit positions fell from 61,053 to the level of 59,917. At the same time, short non-profit positions fell from the level of 35,875 to the level of 30,699, as a result of which the non-profit net position rose to the level of 29,218 against the level of 25,178 a week earlier. Closing short positions once again indicate the fact that the upward potential of the pound is simply huge. Last week's closing price also fell slightly to 1.38947 against 1.39915.

Signals of indicators:

Moving averages

Trading is conducted around 30 and 50 daily averages, which indicates the sideways nature of the market before an important decision.

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

The volatility is low, which does not give signals to enter the market.

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.