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

The bears actively defended 1.3100 for two days, and this was no exception yesterday. A good signal to open short positions formed from this range, which I discussed in more detail in my review. After the bears reached the support of 1.3012 in the afternoon, its breakout also took place, which pulled down the pair by another 30 points. However, it was not possible to reach the intended goals, which eventually returned the pound to the resistance area of 1.3100. At the moment, the bulls are preparing the base for a breakout of the 1.3100 resistance, above which bears have concentrated a lot of their stop orders. Therefore, a break in this range will be a signal to open long positions in anticipation of resuming the bull market. The target will be the highs of 1.3169 and 1.3228, where I recommend taking profits. If the pound falls after the data on activity in the service sector, buyers will expect to form a false breakout in the support area of 1.3041, but it is best to buy GBP/USD only for a rebound from the low of 1.2980 with the aim of correcting 30-40 points within the day.

Let me remind you that another increase in short positions was recorded in the Commitment of Traders (COT reports) for July 28, but long positions were seriously reduced. This suggests that there are more and more bears, and also confirms the theory that the pound's strength is only based on the US dollar's weakness and sooner or later everything will end, which will cause the pair to sharply fall, as the problems with Brexit and uncertainty about the prospects for economic recovery have not gone away. The COT report indicates that there was an increase in short non-commercial positions from the level of 61,310 to the level of 64,738 during the week. Long non-commercial positions decreased from the level of 46,230 to the level of 39,392. As a result, the non-commercial net position increased its negative value to -25,409 against -15,080, which indicates the likelihood of a sharp fall in the pound after the US dollar regains strength.

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

Sellers of the pound need to protect the resistance of 1.3100, but with each passing day, faith in this range becomes less and less. Forming a false breakout there will be the first signal for a possible downward correction of the pair to the support area of 1.3041, which additionally acts as the middle of the side channel. An equally important task is to break through and consolidate under this range, which will lead to removing a number of bull stop orders and a larger decline in GBP/USD to the support area of 1.2980, where I recommend taking profits. However, all this will happen only if the UK service sector data turns out to be weak, which is published today. If bears are not active in the 1.3100 resistance area, it is best to postpone short positions until the test of last week's high in the 1.3169 area, provided that a false breakout forms there. Or sell the pound immediately on a rebound from the larger resistance of 1.3228, based on a correction of 30-40 points within the day.

Indicator signals:

Moving averages

Trading is carried out in the area of 30 and 50 moving averages, which indicates market uncertainty with a further 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 daily D1 chart.

Bollinger Bands

A breakout of the upper border of the indicator around 1.3115 will lead to a new wave of growth in the pound. In case of a decline, support will be provided by the lower border of the indicator at 1.3000.

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.
• The MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages). Fast EMA period 12. Slow EMA period to 26. The 9 period SMA.
• Bollinger Bands (Bollinger Bands). The 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.
• The total non-commercial net position is the difference between short and long positions of non-commercial traders.