GBP/USD: plan for the European session on January 5. COT reports (analysis of yesterday's deals). Po
To open long positions on GBP/USD, you need:
The British pound collapsed following the announcement of a third lockdown in the UK due to the coronavirus pandemic, which will come into effect on Tuesday. At the same time, several signals were generated to enter the market. Let's take a look at the 5-minute chart and break down all the entry points. In the afternoon forecast, we revised the resistance level and recommended opening short positions after a false breakout in the 1.3701 area. The downward movement from this level was around 70 points. But even if you did not manage to enter shorts from annual highs and navigate there, then it's okay. Another sell signal was formed during the US session, after a breakout and consolidation below 1.3629, which sharply pulled down GBP/USD to a low of 1.3573, where I advised to buy the pound immediately on the rebound.
At the moment, news of the introduction of a lockdown will continue to weigh on the pound. Therefore, the initial goal is to protect support at 1.3566. Forming a false breakout on it in the first half of the day creates a signal to open long positions in the pound in order to return to the larger resistance of 1.3629, where the moving averages are located, playing on the side of sellers. Only a breakout and consolidation above 1.3629 will signal an increase in long positions, which can also bring back the upward trend observed since the beginning of December last year. If buyers are not active in the 1.3566 area, and this situation is likely, then it is better not to rush into buying, but wait for an update of larger lows in the 1.3516 and 1.3475 areas, from where you can open long positions for a rebound. Considering that the market is currently under the control of sellers, the lower the pound falls, the more likely it is to expect large buyers to return to the market, betting on growth in the medium term.
To open short positions on GBP/USD, you need:
The pound might be under pressure at any time, since we do not expect anything positive from the new lockdown, and there is no news on a vaccine from the new coronavirus strain that is currently raging in the UK. The bears will try to prevent GBP/USD from rising above resistance at 1.3629. Forming a false breakout there in the first half of the day will be a signal to open short positions while aiming for a succeeding downward correction to the area of a low of 1.3566. An equally important task for sellers will be to surpass and get the pair to settle below this range, testing it from the bottom up (similar to yesterday's shorts, which I analyzed above), creates a convenient entry point to short positions, which will quickly pull down GBP/USD to the area of a low of 1.3516 minimum. Succeeding target will still be support levels 1.3475 and 1.3433, where I recommend taking profits. If the bears ignore resistance at 1.3629, and since we do not expect important fundamental statistics for the UK today, then it would be best to postpone short positions until this year's highs are renewed in the 1.3701 region, counting on a downward correction of 30-40 points within the day.
Let me remind you that the Commitment of Traders (COT) reports for December 21 recorded an increase in interest in the British pound, both among buyers and sellers. Long non-commercial positions increased from 35,128 to 37,550. At the same time, short non-commercial remained practically unchanged and increased only from 31,060 to 31,518. As a result, the non-commercial net position remained positive and grew from 4,068 to 6,032. All this suggests that traders continue to bet on the strengthening of the pound, even in the face of the new Covid-19 strain, which was first recorded in the UK. Everyone believes in the vaccine and that the beginning of this year, will be associated with strong economic growth as soon as the quarantine measures are lifted, which will give the market a new bullish momentum and result in the pound renewing new annual highs. Additional stimulus from the Bank of England may somewhat smooth out the upward trend in the pound, but it may not be there, since the trade deal with the EU was concluded at the very last moment. Indicator signals:
Trading is carried out below 30 and 50 moving averages, which indicates that the pound will continue to fall.
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 D1 daily chart.
The pair's growth will be limited by the upper level of the indicator around 1.3660. In case the pound falls, support will be provided by the lower border of the indicator at 1.3516. Description of indicators
Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
Bollinger Bands (Bollinger Bands). Period 20
Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
Long non-commercial positions represent the total long open position of non-commercial traders.
Non-commercial short positions represent the total short open position of non-commercial traders.
Total non-commercial net position is the difference between short and long positions of non-commercial traders.