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To open long positions on GBP/USD, you need:
Yesterday, sellers of the British pound completely controlled the resistance level of 1.3128, and formed a false breakout on it in the afternoon, the purpose of which was to break down speculative stop orders of bears, thereby, causing another good entry point for short positions to form. Let's take a look at the 5-minute chart. You can see how after an unsuccessful attempt at growth, the bears returned the pair to the 1.3128 level and tried to test it from the bottom up, thereby forming a sell signal. After that, there is a fairly large drop in the pound of around 60 points. Meanwhile, there were important events that many were waiting for in the futures market. The bulls took control of the market in the medium term, and the net position became positive for the first time in a long time. Let's figure it out.
The Commitment of Traders (COT) reports for August 18 marked an increase in long positions, as well as a reduction in short ones. This suggests that, even despite the differences that exist with the EU regarding the trade deal, recent macroeconomic indicators make us believe in a more active recovery of the UK economy after the pandemic crisis. Especially if we recall the data from last week, which once again proved that companies and businesses, together with a package of assistance to the unemployed, have successfully endured the pandemic. The COT report indicates that short non-commercial positions decreased from 59,874 to 47,806 during the week. On the contrary, long non-commercial positions increased from the level of 48,053 to the level of 54,310. As a result, the non-commercial net position became positive and reached 6,504, against 2,821. This suggests that the market trend has changed and it is more attractive and interesting to purchase the pound from an investment point of view. As for the current situation, retail sales data from the Confederation of British Industrialists will be released today, and a report on US consumer confidence will be published in the afternoon, which will have an impact on the market.
However, the main task of the bulls for today is to protect the 1.3063 range, since a lot depends on it. Forming a false breakout there in the first half of the day will be a signal to open long positions in anticipation of a breakout and settling above the resistance of 1.3122. However, I recommend adding to purchases only after a top-down strength test of the 1.3122 level, which can lead to the growth of GBP/USD in the area of highs 1.3170 and 1.3218, where I recommend taking profits. In case the pair falls under the support of 1.3063, it is best to open long positions after updating the low of 1.3007, or buy GBP/USD immediately on the rebound from the major support of 1.2916 based on a correction of 30-40 points within the day.
To open short positions on GBP/USD, you need:
Just like yesterday, the most optimal scenario for opening short positions today is forming a false breakout in the resistance area of 1.3122, where the moving averages also pass. In this case, it will be possible to sell the pound and wait for a breakout and consolidation below the support of 1.3063, on which a lot depends. A break of 1.3063 will lead to a reversal of the upward trend and a larger bearish momentum, while we count on a decline to the 1.3007 level. The low of 1.2916 will be the long-term goal, which is where I recommend taking profits. In case the pair is not under pressure around the high of 1.3122, it is best to abandon short positions before updating the levels of 1.3170 and 1.3218 and open short positions from there immediately on the rebound, counting on a correction of 20-30 points within the day.
Indicator signals:
Moving averages
Trading is carried out just below the 30 and 50 moving averages, which indicates the bears' attempts to continue the pound's decline in the short term.
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 1.3135. In case the pair falls, support will be provided by the lower border of the indicator in the area of 1.3040.
Description of indicators
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