In my morning forecast, I highlighted the level of 1.2704 and planned to make market entry decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The pound rose, but it was a few points short of testing and a false breakout, so I couldn't enter short positions from there. The technical picture still needs to be revised for the second half of the day.
To open long positions on GBP/USD, the following is required:
The absence of statistics led to low volatility and low trading volume. However, this could change in the second half of the day due to the US Consumer Confidence Index report. Its decline, which is forecasted, will lead to another attempt for GBP/USD to rise in the afternoon. The numbers for the housing price index and the Richmond Fed manufacturing index will be less significant. Still, the speech by FOMC member Michelle Bowman will present a new challenge for traders. Given that the technical picture has yet to be revised, the primary task for buyers will be to defend the nearest support at 1.2672, where all the emphasis is placed. Only forming a false breakout will provide an entry point for long positions, targeting a new wave of growth to the level of 1.2704. A breakout and a reverse top-down test of this range will be a suitable condition for buying, targeting a renewal of 1.2732. The furthest target will be the 1.2761 area, where I plan to take profits. In the scenario of a GBP/USD decline and the absence of bullish activity at 1.2672 in the second half of the day, pound buyers will lose all initiative, which will only increase pressure on the pair. This will also lead to a decline and renewal of the next support at 1.2646. Only forming a false breakout will be a suitable condition for opening long positions. I plan to buy GBP/USD immediately on a rebound from the 1.2622 low, targeting a correction of 30-35 points within the day.
To open short positions on GBP/USD, the following is required:
Sellers can take control of the market at any moment, and strong US data will suffice for this. In the event of a bullish reaction to the reports, only forming a false breakout around the resistance of 1.2704, which we have not yet reached, will be a suitable option for opening short positions targeting a decline to the support area of 1.2672, where the moving averages are located. Returning under the control of this level, as well as a breakout and reverse test from below, will be a significant blow to buyers, leading to the removal of stop orders and opening the way to 1.2646. The furthest target will be the 1.2622 area, where I will take profits. Testing this level will also indicate that sellers have regained market control. In the scenario of GBP/USD rising and a lack of activity at 1.2704 in the second half of the day, buyers will strengthen their advantage. In this case, I will postpone sales until a false breakout at the level of 1.2732. If there is no downward movement there, I will sell GBP/USD immediately on a rebound from 1.2761, but only expecting a downward correction of 30-35 points within the day.
In the COT (Commitment of Traders) report as of June 18, there was an increase in short positions and a slight reduction in long positions. The outcomes of the Bank of England meeting, where it was revealed that interest rates in the UK could be lowered as early as August this year, though not a revelation for traders, still influenced the balance of forces, leading to a sharp reduction in long positions. The greater disparity with the policies and actions of the Federal Reserve, which recently kept interest rates unchanged and signaled only a possible rate cut later this year, maintains demand for the US dollar and works in its favor. According to the latest COT report, non-commercial long positions dropped by 4,380 to 105,920, while non-commercial short positions increased by 120 to 58,299. As a result, the spread between long and short positions decreased by 6,785.
Signals from Indicators:
Moving Averages
Trading is slightly above the 30 and 50-day moving averages, indicating attempts for the pound to rise.
Note: The period and prices of moving averages considered by the author are on the hourly chart (H1) and differ from the general definition of classic daily moving averages on the daily chart (D1).
Bollinger Bands
In case of decline, the lower boundary of the indicator, around 1.2672, will act as support.
Description of Indicators:
- Moving Average (50-period, yellow on the chart): Determines the current trend by smoothing volatility and noise.
- Moving Average (30-period, green on the chart): Determines the current trend by smoothing volatility and noise.
- MACD (Moving Average Convergence/Divergence): Fast EMA period 12, Slow EMA period 26, SMA period 9.
- Bollinger Bands: Period 20.
- Non-commercial traders - speculators such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting specific requirements.
- Long non-commercial positions represent the total long open positions of non-commercial traders.
- Short non-commercial positions represent the total short open positions of non-commercial traders.
- The net non-commercial position is the difference between short and long positions of non-commercial traders.
