To open long positions on GBP/USD, you need:
Yesterday, the bulls of the British pound managed to cope with their tasks. In the first half of the day, the pressure on the British pound increased and the pair dropped to the area of a large support at 1.4127. It was not tested during the European session and a false breakout there, so there were no signals to enter the market. If you look at the 5-minute chart, you will see that during the US session, the scenario of buying from the level of 1.4127 was realized. The false breakout led to an excellent entry point into long positions, and the rally was around 30 points, which is quite good for yesterday's market volatility of 60. The pound is under pressure due to disagreements between the EU and the UK over compliance with the Brexit agreement. The likelihood of a later opening of the economy due to the new Indian strain of the coronavirus also repels those who regret buying the British pound in the short term.
Today, there is no important report on the UK and representatives of the Bank of England will not speak either, so the pound can continue to trade in a narrow horizontal channel, focusing only on news about the problem with compliance with the Brexit deal. The bulls' initial task for the European session is to protect support at 1.4153. This level is intermediate, so it can be easily "smeared", so I wouldn't bet on it too much. Forming a false breakout there will be the first signal to open long positions in hopes of a recovery to larger levels, on which the pound's succeeding growth depends. An important task for the bulls is to regain control of resistance at 1.4189. Only a consolidation in this range, followed by its test from top to bottom, will lead to forming a signal to open long positions with an exit to the high of 1.4241, where I recommend taking profits. If GBP/USD drops to the 1.2153 area and there is no bullish activity there, or vague signals to enter the market are formed in one direction or the other, then it is best to postpone long positions until the 1.4121 low has been updated, which was formed yesterday after a false breakout of 1.2127. This level is a kind of lower border of a wide horizontal channel, but you can buy the pound from there only if a false breakout is formed. I recommend opening long positions immediately on a rebound only from the low of 1.4085, counting on an upward correction of 20-25 points within the day...
To open short positions on GBP/USD, you need:
Bears need to think of a way to regain control of the intermediate support at 1.4153, which was formed at the end of Tuesday. This will not be easy without important fundamental reports. Therefore, only a breakthrough and consolidation below this range with a reverse test of it from the bottom up will lead to forming a point of entry into short positions in hopes that the pair would return to support at 1.4121 and an exit to new lows in the area of 1.4085, where I recommend taking profits. If GBP/USD grows in the first half of the day on the back of good news on Brexit, which is unlikely, then the bears should focus on forming a false breakout in the resistance area of 1.4189, which will create a good entry point for short positions. If the bears are not active at this high, it is best to postpone selling until the new resistance at 1.4241 has been updated, where you can open short positions in the pound immediately on the rebound, counting on a downward correction of 20-25 points within the day. The 1.4241 level is the upper border of a wide horizontal channel, a breakthrough of which will determine the pair's succeeding direction.
The Commitment of Traders (COT) reports for June 1 showed a slight increase in long positions and a very large growth in short ones, which was evidence of a sharp fall in the pound. The statements of the Bank of England representatives no longer work, as market participants need concrete actions, not promises. Until they are present, it will be very difficult for the bulls to surpass new local highs. The risk of a later opening of the UK economy due to the spread of the Indian strain of the coronavirus also poses a number of disincentives for the bulls. However, as soon as the central bank starts to take inflation seriously and talk about changes in the volume of the asset purchase program, the demand for GBP/USD will immediately return. Therefore, the optimal scenario is buying everytime there is a good decline in the British pound against the US dollar. The COT report indicated that long non-commercial positions rose from 64,193 to 64,204, while short non-commercial positions rose much stronger from 33,534 to 40,079, which indicates the emergence of new bears in the market after a couple of regular local highs. As a result, the non-commercial net position decreased from the level of 30,659 to the level of 24,125. The closing price of the last week changed and amounted to 1.42270 against 1.41553.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates that there is no definite market direction.
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 in the area of 1.4131 will act as a support.
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.
