08.04.202108:21 Forex Analysis & Reviews: GBP/USD: plan for the European session on April 8. COT reports. Pound continues to storm, and volatility will not decrease in any way. Bears aim to surpass 1.3735

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

If Tuesday was just a great day for trading the British pound, then yesterday we surpassed the designated levels, falling short by 5-7 points, the market turned in the other direction, making it impossible to earn. Let's take a look at the 5 minute chart and break down the entry points. In the first half of the day, the next false breakout at 1.3814 at the beginning of the European session inspired confidence in the scenario of an upward correction, as I expected a good report on the UK services sector and an increase in the composite PMI. However, after a while, the bears managed to surpass this range, which caused the pair to fall and resulted in losses. After some time: during the reverse test of the 1.3814 level from the bottom up, a good signal for opening short positions appeared in order to continue the bear market, however, we did not wait for a large downward movement. After falling by 18 points, the pair turned around and the bulls took control of the 1.3814 level. The levels were revised in the afternoon, but nothing good happened there either: surpassing 1.3774 did not provide a reverse test, which did not make it possible for us to enter short positions (I marked with blue lines the condition under which I would sell the pound). We did not reach 5 points even before buying for a rebound from support at 1.3719. Selling on the reverse test of the 1.3774 level in the middle of the US session was not the best decision, since there was no quick downward movement and it was just lucky that the pound fell below 1.3774 by the end of the day.

Exchange Rates 08.04.2021 analysis

Important fundamental reports on the UK will not be released today, and data on the construction sector is unlikely to help the British pound in strengthening its positions. Therefore, buyers will focus on protecting the new support at 1.3735 during the first half of the day, which was formed at the end of Wednesday. Forming a false breakout there with confirmation of the divergence on the MACD indicator will lead to a signal to open long positions in order to restore the pound to the resistance area of 1.3786, where I recommend taking profits. Moving averages, playing on the sellers' side of the pound, also pass there. The next target will be the high at 1.3834. The pair will be under pressure if the bulls are not that active at the 1.3735 low: in this scenario, it is best to postpone long positions until the test of the larger low at 1.3704, or open long positions immediately on a rebound from the large March support at 1.3670, counting on an upward correction in 25-30 points within a day.

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

The bears fully coped with their tasks in the afternoon, refusing to let the pound rise above 1.3786. The focus will shift to support at 1.3735 in today's European session. A breakthrough and consolidation below this level with a reverse test from the bottom up can create another entry point for short positions in hopes to pull down GBP/USD to a new low at 1.3704, where I recommend taking profits. The next target will be support at 1.3670. However, before selling on the breakout of 1.3735, you need to make sure that a divergence will not form on the MACD indicator, which limits the pair's potential to decline. In case GBP/USD grows in the first half of the day, I recommend not to rush to sell: the optimal scenario will be short positions, provided a false breakout is formed in the resistance area of 1.3786, where the moving averages are also located. I recommend opening short positions immediately on a rebound from a larger resistance at 1.3834, counting on a correction of 20-25 points within the day.

Exchange Rates 08.04.2021 analysis

The Commitment of Traders (COT) for March 30 recorded a reduction in both long and short positions, while the total non-commercial net position increased. Bulls have been active in the past week with every approach to major support levels, which has led to such a mess in the market. The latest report on the UK economy made it possible to build a new upward correction for the pound, albeit so far only in the short term. Confidence continues to grow among investors and economists that the UK economic recovery is gaining quite good momentum, which will support the British pound this summer, as disagreements grow at the Bank of England over how the economy will develop further and when to respond to all this. Those who expect to buy the pound should take a closer look at the market.

So: long non-commercial positions fell from 51,843 to 47,222. At the same time, short non-commercial positions fell from 30,024 to 22,263, which indicates a serious revision of forces in the market in the near future. As a result, the non-commercial net position rose to 29,959 from 21,819 a week earlier. The weekly closing price dropped to 1.3774 from 1.3859.

Indicator signals:

Moving averages

Trading is carried out below 30 and 50 moving averages, which indicates the bears' attempt to continue the downward trend.

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

In case of growth, the upper border of the indicator in the area of 1.3810 will act as a resistance. The lower border of the indicator around 1.3704 acts as a support.

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.
  • Short non-commercial 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.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Miroslaw Bawulski,
Analytical expert
InstaForex Group © 2007-2021
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