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To open long positions on GBP/USD, you need to:
In my morning forecast, I paid attention to sales around the level of 1.3612 and purchases from the low of 1.3575. Let's look at the 5-minute chart and talk about what happened in the market and why the pound rose so sharply at the beginning of the US session. It is visible how the bears achieve a breakout of the support of 1.3612 and then test it from the bottom up, which forms a signal to open short positions on the pound. To be fair, we need to say that one point was missing before the level test, so those who ignored this entry point and who waited for a clearer signal did everything correctly. If you missed a deal, it's okay. At the very least, you didn't lose any money. However, the purchase of the pound on the rebound from the support of 1.3575 had to be done without fail. During the first test, an upward correction occurred, which brought the expected 25 points of profit. Everything is exactly as I predicted in my morning review. Those who did not leave the market could get a fat profit, since after the meeting of the Bank of England, the British pound rushed up. This happened after the regulator announced that the topic of negative interest rates is not "close" to it.
As a result of the sharp rise in the pound, the technical picture has changed slightly. Now buyers are focused on the resistance of 1.3679. A breakout and consolidation above this level with a test of it from top to bottom forms an excellent buy signal in the continuation of the bull market. In this case, you can count on the test of a new high of 1.3707, where I recommend fixing the profit. A more optimal scenario for opening long positions is a downward correction, which may occur after the release of fundamental statistics on the US economy, which will strengthen the position of the US dollar. You can buy the pound during the correction immediately on the rebound from the low of 1.3632 in the continuation of the upward trend.
To open short positions on GBP/USD, you need to:
The bears will count on the formation of a false breakout in the resistance area of 1.3679. Only such a scenario will lead to a downward correction of GBP/USD to the support area of 1.3632, where I recommend taking the profits. If, after a false breakdown, a rapid downward movement of the pound does not occur, and the data on the American economy by that time has already been released, or it turns out to be worse than economists' forecasts, it is best not to rush into sales, but wait for a new wave of growth with a renewed maximum of 1.3707, from which you can open short positions immediately on a rebound in the expectation of a downward correction of 20-25 points within the day. Considering what a strong upward trend is now observed, it is better not to rush to sell but to let the market calm down a little.
Let me remind you that the COT reports (Commitment of Traders) for January 26 recorded an increase in both long and short positions. This time, there were much more sellers, which led to a decrease in the positive delta. The unsuccessful attempts of the bulls to break above the annual highs still do not pass without a trace, forcing traders to increase short positions in the expectation of a more active downward correction of the British pound. Long non-profit positions rose from the level of 45,904 to the level of 47,360. At the same time, the short non-profit jumped from the level of 32,199 to the level of 39,395, which is a very significant increase. As a result, the non-profit net position declined to 7,965 from 13,705 a week earlier. And although traders are trying to take a more wait-and-see position in the area of annual highs, and this is a consequence of the fact that it is very difficult for the bulls to update them, the demand for the pound will still be quite high. As the quarantine measures are lifted, which were strengthened due to the new COVID-19 strain, the upward movement of the GBP/USD pair will be more active. The support of the population and the labor market, which may last until the beginning of the summer of 2021, will also have a positive impact on the British pound. All the talk about negative interest rates on the part of the Bank of England does not yet have a real basis. In the near future, a large report of the English regulator on this topic will be published, which can describe in more detail the picture with the further course of interest rates.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 daily averages, which indicates an attempt by the bulls to take control of the market.
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
In the case of a downward correction, the average border of the indicator in the area of 1.3620 will act as a resistance.
Description of indicators
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