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To open long positions on GBP/USD, you need to:
In my forecast for the first half of the day, I paid attention to the level of 1.4108 and talked about its importance for continuing the bullish scenario. Let's look at the 5-minute chart and analyze the entry point that was formed. It is clear that the bears are trying to break below the level of 1.4108 several times, but all to no avail. All this leads to the formation of a signal to open long positions in the continuation of the bullish scenario of the pound. However, after a small jump of the pair up, the enthusiasm of the bulls decreased. Traders are waiting for the speech of the Governor of the Bank of England, Andrew Bailey, who may raise the topic of curtailing the bond purchase program in the near future. It will lead to another jump in the British pound upward.
From a technical point of view, nothing has changed, and the scenario on which decisions can be made. The market remains on the side of buyers, and as long as trading is conducted above the level of 1.4108, we can count on the continued growth of the pound. The next formation of a false breakout at the level of 1.4108 forms a signal to open long positions in the continuation of the bull market we have seen since the end of last week. In this scenario, you can again count on the update and the resistance test of 1.4155, which has not yet been broken above. Weak fundamental data related to the labor market, which last week led to a major drop in the dollar, may put pressure on it today. Therefore, all the attention to the vacancy rate and labor turnover is from the Bureau of Labor Statistics. A bad report will bring back demand for the British pound and strengthen its position. The main task of the bulls will be to break through the resistance of 1.4155. After testing this level from top to bottom, you can safely open new long positions to continue the bullish trend to update the maximum of 1.4201, where I recommend taking the profits. The next major resistance is at 1.4241. If the bulls do not show activity in the support area of 1.4108, it is best not to rush to buy. The optimal scenario will be long positions immediately on the rebound from the support of 1.4062, or even lower - from the level of 1.4016 in the expectation of an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need to:
The bears have already "felt" the support of 1.4108. However, they failed to break it. It is quite possible that the speech of the Governor of the Bank of England, Andrew Bailey, will increase the pressure on the pair. If he does not raise the topic of curtailing stimulus programs, the pound may adjust, especially given the developing problems due to Brexit. A break and consolidation below the level of 1.4108 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 1.4062, where the moving average is playing on the side of the pound buyers. A more distant target will be the level of 1.4016, where I recommend fixing the profit. If we see the pound's growth during the US session, the best option for opening short positions will be the formation of a false breakout in the resistance area of 1.4155. If the bears do not show activity, it is best to postpone short positions until the update of a larger local maximum in the area of 1.4241, based on a downward correction of 20-25 points within the day.
Let me remind you that the COT reports (Commitment of Traders) for May 4 recorded a reduction in long positions and increased short ones. However, the data does not consider Friday's market changes, when the British pound showed a major increase. Last week, we all followed the decision of the Bank of England on interest rates, so traders feared for the further growth of the pound, increasing short positions. Keeping monetary policy unchanged limited the upward potential of the pound. Still, hints from committee members that it was time to think about curtailing stimulus programs breathed new strength into the buyers of the pound. Disappointing data on the US labor market will continue to put pressure on the US dollar for a long time at any opportunity. Therefore, the trend for the strengthening of the British pound will continue. The prospect of a recovery in the UK economy in the summer, when all quarantine restrictions will be lifted, also causes a lot of optimism and helps buyers of the pound find excuses to build up positions. The COT report shows that long non-profit positions have declined from 59,917 to the level of 52,262. At the same time, short non-profit positions rose from the level of 30,699 to the level of 32,414, resulting in a non-profit net position falling to the level of 19,848 from the level of 29,218 a week earlier. But the closing price of last week rose to the level of 1.39033 against 1.38947.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 daily averages, which indicates the continued growth of the pound.
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
A break of the upper limit of the indicator in the area of 1.4145 will lead to a new wave of growth of the pound. A break of the lower limit in the area of 1.4108 will increase the pressure on the pair.
Description of indicators
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