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To open long positions on GBP/USD, you need:
A large number of signals to enter the market were formed for the pound yesterday and all of them turned out to be quite profitable. Let's take a look at the 5 minute chart and understand the entry points. In the first half of the day, volatility was not high, but several signals to enter the market were generated. In my morning forecast, I spoke about the 1.3428 level and advised to buy the pound in case of a false breakout, which happened. Several unsuccessful attempts by the bears to break below this range resulted in a long entry point. The growth from the entry point was about 30 points. In the afternoon, the bears still achieved a breakthrough and a reverse test of the 1.3420 level, which resulted in forming several signals to sell GBP/USD further along the trend. The downward movement was about 35 points.
Before examining the technical picture of the pound, let's take a look at what happened in the futures market. The Commitment of Traders (COT) reports for November 16 revealed that short positions sharply increased and long positions decreased, which led to an increase in the negative delta. Good data on the recovery of the UK labor market, increased inflationary pressures and higher retail sales - all this saved the British pound last week and gave the bulls a chance for the pair to continue to rise. However, the aggravation of the situation with the coronavirus in the European part of the continent and the statements of representatives of the Bank of England that no one would rush to change the course of monetary policy in the current conditions - all this very quickly returned the pressure on the pair by the end of the week. An important point is the unresolved issue around the protocol on Northern Ireland, which the UK authorities are planning to suspend in the near future. To this, the European Union is preparing to introduce certain countermeasures - which does not add confidence to the bulls of the British pound. At the same time, in the United States of America, we are witnessing a rise in inflation and increased talk about the need for an earlier increase in interest rates next year, which is providing significant support to the US dollar. However, I recommend sticking to the strategy of buying the pair in case of very large falls, which will occur against the background of uncertainty in the central bank's policy. The COT report indicated that long non-commercial positions declined from 54,004 to 50,443, while short non-commercials rose from 66,097 to 82,042. This led to an increase in the negative non-commercial net position: delta was -31 599 against -12,093 against a week earlier. The weekly closing price collapsed as a result of the Bank of England's policy from 1.3563 to 1.3410.
Today we have published quite interesting statistics on activity in the UK for November this year. The November reports on the PMI for the services sector as well as the PMI for the manufacturing sector will show whether there were significant changes in the economy in the fall period and in what form it came to the end of this year. If the data comes out better than forecasted and indicates that good growth prospects remain, this will lead to a strengthening of the pound. However, the main task of bulls in the first half of the day is to protect the nearest support at 1.3380. Forming a false breakout there, along with good statistics, creates a signal to buy the pound against the trend. This will return the chance for an upward correction of the pair to the 1.3417 area, where the moving averages, limiting the pair's upward potential, pass. An equally important task is to regain control over this level. A breakthrough and reverse test from top to bottom at 1.3417 will provide another signal to buy the pound, which will lead to GBP/USD moving up to the 1.3453 area with the prospect of reaching a high of 1.3494, where I recommend taking profits. In case the pair falls in the first half of the day and traders are not active at 1.3380, the best option to buy the pound would be a test of the November 12 low - 1.3354. However, I advise you to open long positions there only after a false breakout. You can watch long positions on GBP/USD immediately for a rebound from a new low of 1.3308, or even lower - from support at 1.3254, counting on a correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
Yesterday, the bears dropped the pair to another low and do not intend to yield to the market. If today's data on activity does not bring surprises or even worse - it turns out to be worse than economists' forecasts, most likely the pressure on the pair will only increase. Of course, the best option would be to form a false breakout at the level of 1.3417, where the moving averages pass, which will lead to the formation of the first entry point to short positions, followed by a decline in GBP/USD to the 1.3380 area. Breaking through this range will be equally important for the bears. Testing 1.3380 from the bottom up forms an additional signal to open new short positions further along the trend with the aim of falling to the lows: 1.3354 and 1.3308, where I recommend taking profits. If the pair grows during the European session and there are no bears at 1.3417, it is best to postpone selling until the larger resistance at 1.3453. I advise you to open short positions immediately on a rebound from 1.3494, or even higher - from a new high in the 1.3560 area, counting on the pair's rebound down by 20-25 points within the day.
Indicator signals:
Moving averages
Trading is carried out below 30 and 50 moving averages, which indicates a return of pressure on the pound with the prospect of its further decline to the lows of the month.
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
Growth will be limited by the upper level of the indicator around 1.3450. A breakout of the lower border of the indicator in the area of 1.3360 will increase the pressure on the pair.
Description of indicators
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