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To open long positions on GBP/USD, you need:
In my morning forecast, I focused on the level of 1.3570 and recommended taking it into account when making decisions to enter the market. Let's observe the 5-minute chart and analyze it. Relevant data on the British labor market resulted in the pound's rise in the first half of the day as they generally were in line with economists' forecasts without negative effects from economic slowdown in the country. However, the above mentioned level of 1.3570 was not updated, about 5 points were lacking. Therefore, I did not get a false break with a good entry point to short positions. The technical picture has changed in the second half of the day. Besides, what were the euro's entry points this morning?
During the US session, the next US inflation data will be released, which may favor dollar buyers. However, currently the indicators differ significantly due to the energy market crisis, and taking into account that the data coincides with producer prices, even the most dramatic changes can hardly affect the Federal Reserve System's stance on monetary policy. All these factors are favorable for further pound's strengthening in the short term. In the second half of the day, bulls' key target will be to defend the support at 1.3530, formed in the first half of the day, as well as to assume control of the new resistance at 1.3565, which traders failed to reach during the European session. Buying from the level of 1.3530 is possible only in case of a false breakout. Besides, weak US manufacturing data, which might be slightly above economists' expectations, will favor a good entry point to long positions. A breakout and the test of 1.3565, which buyers are targeting today, and also the downward renewal of that range will form an additional buy signal with the climbing to 1.3602. A more distant target is 1.3640, where I recommend taking profit. In case the GBP/USD pair declines during the US session and bulls lack activity at the level of 1.3530, where the moving averages are, it is better not to buy risky assets. It is advisable to await the test of the next major level of 1.3496, which will be unfavorable for buyers. Formation of a false breakout there will provide an entry point into long positions against the bear market. It is possible to buy the pound immediately for a rebound from the level of 1.3465 or even lower from the low of 1.3434, counting on a 20-25 pips correction within the day.
To open short positions on GBP/USD, you need:
Bears are unwilling to return to the market. However, today they managed to succeed around the resistance of 1.3565. Besides, I advise traders to further focus on it. Sellers' key task is to defend this range as it is not recommended for the pound to move higher. In this case, all bears' efforts to build a downtrend and put the pound in the channel again will be ineffective. A false breakout at 1.3565 combined with US strong producer prices data provides a good entry point to the short positions. It is possible to expect the return of the bear market and the pair's decline to the support area of 1.3530. A breakout and the test of this range from the bottom to the top will give an additional entry point to short positions with the downside target of 1.3496 and 1.3465. A more distant target is the area of 1.3434, where I recommend taking profit. IF the pair rises during the US session and sellers show weak activity at 1.3565, it is better to postpone selling to the level of 1.3602. I also recommend opening short positions there in case of a false breakout. It is possible to sell the GBP/USD pair immediately for a rebound from the level 1.3640, with the goal of a downward rebound of 20-25 pips within the day.
I recommend to review:
The COT reports for February 8 recorded a significant increase in both short and long positions. The latter were much numerous, which led to a reduction of the negative delta. However, the negative value has remained, indicating that sellers dominate in the market. Notably, this report takes into account the outcome of the Bank of England meeting, where it was decided to raise the interest rates. However, it did not favor the pound much as it is clear that these changes were made to fight high inflation. Considering that the British economy is facing a crisis and the economic growth could slow down at any moment, raising the interest rates has not resulted in the rapid growth of the British pound. Geopolitical events around Russia and Ukraine, as well as the Federal Reserve's decisive action on future interest rates this March exert pressure on pound buyers and are an additional deterrent to the bull market for GBP/USD. Some traders expect that the US central bank may resort to more aggressive policy and raise interest rates immediately by 0.5% rather than 0.25%. In this case, it will be a bullish signal for the US dollar. The February 8 COT report indicated that long non-commercial positions rose from 29,597 to 44,709, while short non-commercial positions increased not significantly from 53,202 to 53,254. This fact led to a sharp decline in the negative nonprofit net position from -23,605 to -8,545. The weekly closing price rose from 1.3444 to 1.3537.
Indicator Signals:
Moving averages.
Trading is conducted above the 30 and 50 day moving averages, however, it does not yet indicate a break in the bearish movement.
Note. The period and prices of moving averages are considered by the author on hourly chart H1 and differ from the common definition of classic daily moving averages on daily chart D1.
Bollinger Bands.
In the case of decline, the lower boundary around 1.3515 of the indicator will act as support. In the case of growth, the middle indicator boundary around 1.3555 will act as resistance.
Description of indicators
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