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

Yesterday, it was possible to observe a fairly high volatility in the British pound, which resulted in creating a fairly large number of entry points into the market. All of them were quite profitable. Let's look at the 5-minute chart and figure out the deals.

Failure to settle above the resistance of 1.3860, along with a disappointing report on the unemployment rate in the UK, created an excellent signal to open short positions, after which the pound fell more than 40 points down to the support area of 1.3829. Then the bulls got down to business and quickly won back this area. A reverse test from top to bottom created an excellent entry point into long positions, afterwards the pair shot up by more than 60 points.

The pound was under pressure during the US session and the bears managed to take control of the support of 1.3867. Its reverse test from the bottom up created an excellent entry point into short positions, which caused GBPUSD to fall to the area of a low like 1.3834, allowing us to take about 25 points.

Today, we do not expect important fundamental reports from the UK, so the first half of the day promises to be quite calm. The focus will shift to the US session and the US retail sales report. The best option for the bulls is to form a false breakout at the level of 1.3827, around which the main trade was conducted during the Asian session. This scenario forms a signal to open long positions in hopes that the pair would recover to the resistance of 1.3862. After yesterday's statements from the Bank of England representatives, we can count on maintaining demand for the British pound, so a breakthrough of 1.3862 and a test of this area on the reverse side can create another entry point into long positions in hopes of returning to the weekly high at 1.3896, where I recommend taking profits. A more distant target will be the 1.3937 area. If the pressure on GBP/USD increases during the European session, and the bulls are not active in the area of 1.3827, it is best to postpone long positions until the support update of 1.3802. You can buy the pound immediately for a rebound from a larger low like 1.3771, counting on a rebound of 25-30 points within the day.

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

The initial task of the bears is to protect the resistance of 1.3862, which they successfully managed to do several times yesterday. Forming a false breakout there, by analogy with the entry points that I analyzed, creates a sell signal, which will increase the pressure on the pound and return the market to a bearish nature. The nearest target will be the support of 1.3827, around which there were many movements today. Further prospects for the decline of GBP/USD depend on the breakdown of this level. Therefore, only the reverse test of 1.3827 from the bottom up can create an additional entry point into short positions in order to pull down the pair to the lower border of the horizontal channel at 1.3802, where I recommend taking profits. A more distant target will be the support of 1.3771. If the bears are not active in the area of 1.3862, I recommend postponing short positions until the test of a larger high like 1.3896, where you can open short positions immediately for a rebound based on a downward correction of 25-30 points within the day.

The COT reports (Commitment of Traders) for July 6 showed that both long and short positions have increased, which resulted in a growth in the net position. Despite the weak fundamental data on the growth rate of UK GDP in May this year, the pound continues to be in demand after the correction that was observed during the June meeting of the US Federal Reserve. Traders are showing particular interest now after the major downward movement in GBP/USD, and the May data is not an obstacle to building up long positions, as everyone expects more robust economic growth in the summer, even despite the Indian strain of the coronavirus. However, the pound's growth may be limited not only due to a sharp increase in the incidence in the summer, but the fact that the British central bank will not rush to change the program for buying bonds is also a deterrent to the upward trend. Until serious inflationary pressures are noticed in the UK, the Bank of England is unlikely to rush to change its policy. Despite this, the best scenario is to buy the pound for every good decline against the US dollar. The COT report indicated that long non-commercial positions rose from 51,596 to 57,232, while short non-commercial positions increased from 33,873 to 35,329. As a result, the non-commercial net position increased from 17,723 to 21,903. Last week's closing price decreased and reached 1.3853 against 1.3878.

Indicator signals:

Trading is conducted in the area of 30 and 50 moving averages, which will not allow us to determine the direction of the market in the short term.

Moving averages

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

In case the pound falls, the lower border of the indicator around 1.3802 will provide support. If the pound rises, the upper limit of the indicator in the area of 1.3870 will act as a resistance.

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.
• Short non-commercial 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.