05.05.202006:46 Forex Analysis & Reviews: GBP/USD: plan for the European session on May 5. COT reports indicate an increase in both long and short positions. Bears need to return support 1.2441

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

Yesterday, after several unsuccessful attempts to continue pushing the pound's decline from the 1.2441 level, the bears retreated from the idea of reaching a new low of 1.2391, and gave up the 1.2441 level, which is another headache. The Commitment of Traders (COT) reports for April 28 showed an increase in both long and short positions, but the latter turned out to be much more, which once again indicates the probability of continuing the bearish market phase, which formed on April 30. There are fewer people willing to buy the pound at such high prices. According to the data, during the reporting week, there was an increase in short non-commercial positions from the level of 30,907 to the level of 38,147, while long non-commercial positions grew only from the level of 29,527 to 31,466. As a result, the non-commercial net position became even more negative and ended up at -6,681, against -1,381, which indicates a tipping point and a real resumption of the downward trend for the pound in the short term. As for the intraday situation, the bulls need to form a false breakout in the support area of 1.2441 today, which they were able to during the Asian session. This scenario will lead to a larger upward correction to the high of 1.2507, just below which the moving averages pass. A more important task for buyers of GBP/USD will be to break through and consolidate at this level, which will necessarily lead to an update of the resistance of 1.2567, where I recommend taking profits. However, if there is no activity in the support area of 1.2441 after the weak PMI report for the UK services sector, it is best to postpone long positions until the update of the low of 1.2391, but I recommend buying the pair immediately for a rebound only after testing the area of 1.2300. Do not forget that while trading is above 1.2441, the bulls still have a chance to save the upward trend that formed on April 21.

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

Sellers have an equally difficult task, since a breakout is required to resume the downward trend and consolidate below the support of 1.2441, on which a lot depends. However, as I noted above, the market is on the side of sellers, so we can expect a more confident return of control and the pound to decline further. A break of 1.2441 will probably lead to a rapid decline in the GBP/USD to the support area of 1.2391, and the sellers' long-term goal will be the low of 1.2347, where I recommend taking profits. Poor data on the state of the UK services sector will only increase the pressure on the pair. In the growth scenario in the first half of the day, you can return to short positions on a false breakout from the resistance of 1.2507, but it is best to sell the pound immediately on a rebound from the high of 1.2567 based on a correction of 30-40 points within the day.

Signals of indicators:

Moving averages

Trade is carried out in the region of 30 and 50 moving average, which indicates an attempt to return the pair to their control by the bears.

Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differs from the general definition of the classic daily moving averages on the daily chart D1.

Bollinger bands

A break of the lower border of the indicator in the area of 1.2410 will increase pressure by the pound. Growth above the upper border of the indicator in the area of 1.2465 will lead to a larger upward correction.

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 traders are speculators, such as individual traders, hedge funds and large institutions that use the futures market for speculative purposes and meet certain requirements.
• Long nonprofit positions represent the total long open position of nonprofit traders.
• Short nonprofit positions represent the total short open position of nonprofit traders.
• The total non-profit net position is the difference between short and long positions of non-profit traders.