Black Pipper

Forex Dreamers

Plan for the European session on May 4. Commitment of Traders COT reports (analysis of yesterday’s deals). The pound is almost back

To open long positions in GBP / USD you need:

Yesterday’s big gains in the British pound allowed buyers 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 the buyers’ task will be to protect the support 1.3863, where the moving averages pass, but we will talk about this a little 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 there, you need to understand what is happening with the positions of major players. 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 any important fundamental statistics for the UK, so all the attention was 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 allowed the buyers of the pound to adhere to their scenario to strengthen 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 downward correction of the pair 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 indicated 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 upside potential of the pound is enormous. Last week’s closing price also dropped slightly to 1.38947 against 1.39915.

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Today we are waiting for a lot of statistics on activity in the UK manufacturing sector and the volume of lending, which may support the pound after the observed downward correction of the pair during the Asian session. Good data will allow a false breakout to be formed in the support area of ​​1.3863, where the moving averages, which play on the buyer’s side, also pass, which will lead to the formation of a signal to open long positions as the pound continues to rise. The main target is also a breakout and consolidation above resistance 1.3917. Only the test of this area from top to bottom on the volume forms another entry point into long positions in the continuation of the uptrend with the main target of reaching the maximum of 1.3970, where I recommend taking profits. The next major resistance is seen around 1.4016. If we do not see any bulls’ activity in the 1.3863 area in the first half of the day, and the UK data will disappoint: the best option would be long positions immediately to rebound from yesterday’s local minimum in the 1.3811-1.3800 area, counting on an upward correction of 20-25 points within the day … A breakout of this range will lead to a larger collapse of the pair towards support at 1.3755, where one can also look at buying for a small upward correction against the trend.

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To open short positions on GBP / USD you need:

The bears have already set their sights on the support 1.3863 to which they have one step left. This move could be weak data on manufacturing activity in the UK last month. If so, the breakout and consolidation below the level of 1.3863 with a reverse test of it from the bottom up will lead to the formation of a good entry point to short positions in the expectation of the pair returning to the 1.3811 area, where I recommend taking profits. The further target will be the level 1.3755, but it will be quite difficult to reach it. If we see the growth of the pound during the European session: the best option for opening short positions would be the formation of a false breakdown in the resistance area of ​​1.3917. If we do not see any bears’ activity there, and the data exceeds the expectations of economists, it is best to postpone short positions until a large local maximum in the 1.3970 area is renewed, counting on a downward correction of 20-25 points within the day.

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Indicator signals:

Moving averages

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

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

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

Description of indicators

  • Moving average (moving average, determines the current trend by smoothing volatility and noise). Period 50. Marked in yellow on the chart.
  • Moving average (moving average, determines the current trend by smoothing volatility and noise). Period 30. Marked in green on the chart.
  • MACD indicator (Moving Average Convergence / Divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
  • Bollinger Bands Period 20
  • Non-commercial traders are speculators such as individual traders, hedge funds and large institutions who 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.
  • The total non-commercial net position is the difference between short and long positions of non-commercial traders.

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