04.05.202113:18 Forex Analysis & Reviews: GBP/USD: plan for the US session on May 4 (analysis of morning trades)

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

In the first half of the day, several signals were formed at once to enter the market. Let's look at the 5-minute chart and talk about where and how you could enter the market. The first sell signal was formed immediately after the breakout and consolidation below the support of 1.3863. The reverse test of this level from the bottom up (which I highlighted on the chart) led to forming a signal to open short positions. However, there was no downward movement, and the pair quickly returned to the level of 1.3863, which brought losses. However, a little later, a signal was formed to buy the pound, which continues to work out at the time of writing at +25 points. It is seen how the reverse test of the level of 1.3863 from top to bottom led to the formation of a new signal to open long positions, the main goal of which is to return to the maximum of 1.3917.

Exchange Rates 04.05.2021 analysis

While trading will be conducted above the support of 1.3863, we can expect the pound to continue to grow in the area of 1.3917, where I recommend taking the profits. In general, while the bulls will be active in the area of 1.3863, large sellers will not rush to enter the market. Breaking through and going beyond the resistance of 1.3917 is an additional task for GBP/USD buyers. Still, today's data on activity in the manufacturing sector failed to please traders, which allows us to maintain balance in the market before the publication of US reports. In the second half of the day, we will see statistics on the US foreign trade balance and changes in the volume of production orders. Weak reports, together with the speech of FOMC member Mary Daly, may put pressure on the US dollar, which will lead to a rise in the pound. A breakout and a test of the level of 1.3917 from top to bottom forms an additional buy signal in the expectation of updating the maximum of 1.3970. If the pressure on GBP/USD returns in the second half of the day, and the bulls do not show activity in the area of 1.3863 – I recommend postponing purchases until the update of a larger local minimum of 1.3811, from which you can buy the pound immediately on the rebound in the expectation of an upward correction of 20-25 points within the day.

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

The bears will still be focused on the support of 1.3863, which they failed to break below in the first half of the day. Strong fundamental data for the US may help to realize this scenario. A repeated breakout and consolidation below the level of 1.3863 with a reverse test of it from the bottom up (by analogy with the sale that I analyzed above) will lead to the formation of a good entry point into short positions in the expectation of a return of the pair to the area of 1.3811, where I recommend fixing the profit. A more distant target will be the level of 1.3755. However, it won't be easy to reach it. If we see the pound's growth during the US session, and buyers have everything for this: the best option for opening short positions will be the formation of a false breakout in the resistance area of 1.3917. If we do not see any bear activity and the US data will be worse than economists – it is best to postpone short positions until the update of a large local maximum in the area of 1.3970, based on a downward correction of 20-25 points within the day.

Exchange Rates 04.05.2021 analysis

Let me remind you that the COT reports (Commitment of Traders) for April 27 recorded a reduction in both long and short positions, while the total non-commercial net position increased. How it happened - let's figure it out. Last week, we did not see important fundamental statistics for the UK, so all the attention was on the European Parliament's vote on Brexit, the results of which supported the pound. Also, the British prime minister's speeches and the possible earlier lifting of all quarantine restrictions on the territory of Britain allowed buyers of the pound to stick to their scenario for strengthening the pair. All this will continue to contribute to growth in the medium term, so I recommend betting on further strengthening against the US dollar. Any good correction of the pair down is another reason to think about buying the pound, as the prospect of a recovery in the UK economy in the summer period causes a lot of optimism. The COT report shows that long non-profit positions fell from 61,053 to the level of 59,917. At the same time, short non-profit positions fell from the level of 35,875 to the level of 30,699, as a result of which the non-profit net position rose to the level of 29,218 against the level of 25,178 a week earlier. Closing short positions once again indicate the fact that the upward potential of the pound is simply huge. Last week's closing price also fell slightly to 1.38947 against 1.39915.

Signals of indicators:

Moving averages

Trading is conducted in 30 and 50 daily averages, which indicates some confusion with the further direction.

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

A break of the lower limit of the indicator in the area of 1.3863 will lead to a new wave of decline in the pound. The growth will be limited near the upper limit of the indicator 1.3920.

Description of indicators

  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
  • MACD indicator (Moving Average Convergence / Divergence - moving average convergence / divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
  • Non-profit 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 the 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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