To open long positions on GBP/USD, you need:
In yesterday's morning forecast, I advised you to open short positions when a false breakout is formed in the resistance area of 1.3395, which is what happened. If you look at the 5-minute chart, you will see how the bulls made an unsuccessful attempt to rise above the 1.3395 level, afterwards a signal to sell the pound appeared, which pulled down the pair to the support area of 1.3354, where the downward trend initially stopped. The bears broke through this range in the afternoon, and testing it from the bottom up formed an additional entry point for short positions, as a result of which the downward movement was about 35 points. But the bulls managed to regain control of the 1.3354 level towards the end of the US session, which led to forming a horizontal channel.
And although we do not expect any news regarding Brexit today, the pound's succeeding direction still depends on it. Also, the direction can be determined by support at 1.3354, which will be emphasized in the morning. A false breakout on it produces a good entry point into long positions while aiming to return to the weekly high of 1.3395. Serious problems may arise with the pound's succeeding growth if this level is not updated. Let me remind you that quite recently, the president of the European Commission said that so far there has been no progress in the talks, and the chief negotiator from the EU side, Michel Barnier, noted his readiness to withdraw from negotiations if the UK does not make concessions. Being able to settle above the 1.3395 level and testing it from top to bottom provides a fairly good signal for buying GBP/USD in order for it to rise to the 1.3453 area. The next target will be a high of 1.3509, where I recommend taking profits. In case the pound falls in the first half of the day and it is not active around 1.3354, it is best to postpone long deals until the lower limit of the 1.3305 horizontal channel has been updated, in which the pair has been staying this whole week. You can buy the pound there immediately on a rebound, counting on an upward correction of 15-20 points.
To open short positions on GBP/USD, you need:
The bears are still looking to regain control over the 1.3354 level, which they missed in today's Asian session. Only its breakout and being able to settle below, similar to the entry point into short positions that I analyzed above, will return new large sellers to the market, which will quickly pull down GBP/USD to the lower limit of the 1.3305 horizontal channel, where I recommend taking profit. We can talk about bringing back the bear market only when we have gone beyond 1.3305, which will lead to removing a number of buyers' stop orders and the pair's fall to a low of 1.3251. If bulls make another attempt to break through the monthly highs in the first half of the day, then I recommend considering new short positions only after forming a false breakout at the 1.3395 level. In the absence of activity there, it is best to refuse to sell until a new high in the 1.3453 area has been updated, where you can sell the pound immediately on a rebound, counting on a correction of 20-30 points within the day.
The Commitment of Traders (COT) reports for November 17 saw a reduction in long positions and a sharp inflow of short positions. Long non-commercial positions declined from 27,872 to 27,454. At the same time, short non-commercial positions increased from 45,567 to 47,200. As a result, the negative non-commercial net position was -19,746 against -17,695 a week earlier, which indicates that the sellers of the British pound retains control and also shows their slight advantage in the current situation. Lack of clarity on the trade deal, together with the lockdown of the British economy in November, clearly does not add optimism and confidence to buyers of the pound.
Trading is carried out in the area of 30 and 50 moving averages, which indicates uncertainty regarding the pound's succeeding direction.
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.
A breakout of the upper border of the indicator around 1.3368 will lead to a new wave of growth for the pound. In case the pair falls, support will be provided by the lower border at 1.3333.
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.