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

For the second day in a row, signals are formed on the pound, which brings only losses. However, it is worth understanding that changing the trading system at the same time, which previously showed a good result, is not worth it. Let's look at the 5-minute chart and analyze the entry points. In the first half of the day, a false breakout at the level of 1.3636 formed a signal to buy the pound, but after a small upward trend, the bears managed to return to this level and broke through it. The breakout of 1.3636 and its reverse test from the bottom up formed a signal to open short positions, however, it was not implemented, and brought only losses.

Now the buyers of the pound will focus on the resistance of 1.3686, which the pair is currently aiming for. To enter long positions, you need to consolidate above 1.3686 and test this area from top to bottom. Only in this case, we can expect the continuation of the upward movement to reach a maximum of 1.3735, where I recommend fixing the profit. A break of this level will form a new bullish momentum, aimed at the highs around 1.3770 and 1.3805. In the case of a decline in the pound in the second half of the day and a return to the support of 1.3636, only the formation of a false breakdown there will be a signal to open long positions. If there are no active actions on the part of buyers, it is best not to rush into purchases, but to wait for the update of the minimum of 1.3585, from where you can open long positions immediately on the rebound to move up by 20-25 points within the day.

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

The bears lost control of the market after the pair returned to the level of 1.3636. This happened after the release of good data on the UK labor market, where significant improvements are noticeable. The initial task of sellers for the second half of the day is to protect the resistance of 1.3686. However, the formation of a false breakout will be a signal to open short positions in the expectation of a repeated decline to the support of 1.3636, where I recommend taking the profit. On the sellers' side, there are also moving averages, which are located just below the level of 1.3686. If there is no activity in the area of 1.3686 and the breakdown of this range, the control of the market by the bears will be completely lost. In this case, it is better not to rush to sell but to wait for the update of the larger resistance of 1.3735 and sell the pound from there immediately to rebound in the expectation of a downward correction of 25-30 points within the day.

Let me remind you that the COT reports (Commitment of Traders) for January 19 recorded a reduction in both long and short positions, which indicates a more cautious approach of traders to this trading instrument. Long non-profit positions declined from the level of 47,935 to the level of 45,904. At the same time, short non-profit positions decreased from the level of 34,993 to the level of 32,199. It can be seen that the reduction of short positions is much stronger than long ones. As a result, the non-profit net position rose to 13,705 from 12,942 a week earlier. And although traders are trying to take a more wait-and-see position in the area of annual highs, and this is a consequence of the fact that it is very difficult for the bulls to update them, the demand for the pound will still be quite high. As the quarantine measures are lifted, which were strengthened due to the new COVID-19 strain, the upward movement of the GBP/USD pair will be more active. The Bank of England's wait-and-see stance on changes in monetary policy also supports the British pound, and the new labor market support program, which was recently proposed by the UK Finance Minister, keeps investors fairly optimistic and confident in the medium-term strengthening of the pair.

Signals of indicators:

Moving averages

Trading is conducted just below the 30 and 50 daily averages, which indicates the sideways nature of the market.

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 upper limit of the indicator in the area of 1.3695 will lead to a new wave of growth. In the case of a decline in the pair, the lower limit of the indicator in the area of 1.3630 will provide support.

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.