04.05.202108:09 Forex Analysis & Reviews: GBP/USD: plan for the European session on May 4. COT reports. Pound returned almost everything it lost last Friday. Bulls need to defend 1.3863

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

Yesterday's big rally in the British pound made it possible for bulls to regain almost everything they lost last Friday amid the downward correction at the end of the month, which I talked about quite a lot. Today their task will be to protect support at 1.3863, where the moving averages pass, but we will talk about this later.

Before examining the technical picture of the pound, let's take a look at what happened in the futures market. And although there are no major changes, you still need to understand what is happening with the positions of major players. The Commitment of Traders (COT) report for April 27 revealed that both long and short positions have decreased, while the total non-commercial net position increased. How it happened - let's figure it out. Last week, we did not see any important fundamental statistics from the UK, so everyone was focused on the European Parliament vote on Brexit, the results of which supported the pound. Also, the speeches of the British Prime Minister and the possible earlier lifting of all quarantine restrictions in Britain enabled the bulls to adhere to their scenario to strengthen the pair.

All this will contribute to growth in the medium term, so I recommend betting that the pound would strengthen further against the US dollar. Any good downward correction is another reason to think about buying the pound, since the prospect of a recovery in the UK economy in the summer gives rise to a lot of optimism. The COT report revealed that long non-commercial positions declined from 61,053 to 59,917. At the same time, short non-commercials fell from 35,875 to 30,699, causing the non-commercial net position to rise to 29,218 against 25,178 a week earlier. Closing short positions once again points to the fact that the pound has a huge potential to grow. Last week's closing price also slightly dropped to 1.38947 against 1.39915.

Today we are waiting for a lot of reports on activity in the UK manufacturing sector and the volume of lending, which may support the pound following the pair's downward correction during the Asian session. A good report will make it possible for a false breakout to form in the support area of 1.3863, where the moving averages, which play on the bulls' side, also pass, which will then create a signal for you to open long positions as the pound continues to rise. The main goal is to surpass and settle above resistance at 1.3917. Testing this area from top to bottom creates another entry point into long positions in continuing the upward trend with the main goal of reaching a high like 1.3970, where I recommend taking profits. The next major resistance is seen around 1.4016. If the bulls are not active in the 1.3863 area during the first half of the day, and the UK report turns out to be disappointing, then the best option would be long positions immediately to rebound from yesterday's local low in the 1.3811-1.3800 area, counting on an upward correction of 20-25 points within the day... Surpassing this range can push the pair to collapse towards support at 1.3755, where one can also look at for a small upward correction against the trend.

Exchange Rates 04.05.2021 analysis

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

The bears have already set their sights on support at 1.3863, which is just one step away. A weak report on manufacturing activity in the UK last month could provide support. If so, surpassing and consolidating below the 1.3863 level with a reverse test from the bottom up can create a good entry point for short positions in hopes of returning the pair to the 1.3811 area, where I recommend taking profits. The next target will be the 1.3755 level, but it will be quite difficult to reach it. If the pound rises during the European session, then the best option for opening short positions would be forming a false breakout in the resistance area of 1.3917. If the bears are not active there, and the report exceeds economists' expectations, then it is best to postpone short positions until a large local high in the 1.3970 area has been updated, counting on a downward correction of 20-25 points within the day.

Indicator signals:

Trading is carried out in the area of 30 and 50 moving averages, which act as a certain support for the pound.

Moving averages

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

Surpassing the lower boundary at 1.3855 will lead to a new wave of decline for the pair. Growth will be limited in the area of the upper area of the indicator at 1.3930.

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
Benefit from analysts’ recommendations right now
Top up trading account
Open trading account

InstaForex analytical reviews will make you fully aware of market trends! Being an InstaForex client, you are provided with a large number of free services for efficient trading.

Can't speak right now?
Ask your question in the chat.