To open long positions on GBP/USD, you need:
Yesterday, a fairly large number of signals to enter the market were formed and they need to be dealt with. Let's take a look at the 5 minute chart and talk about what happened.
A slight rise in the first half of the day and the test of resistance at 1.4128 clearly brought sellers back to the market. But considering that I did not wait for a false breakout in this area, I did not enter short positions. A major breakthrough of the support at 1.4097 did not lead to a reverse test of this level, so I was not lucky with short positions here either. Buying on the rebound from the support at 1.4070 led only to a slight increase in the pound by 13 points, after which the market continued its decline with renewed vigor.
In the forecast for the second half of the day, I advised you to open long positions on condition of a false breakout in the support area of 1.4041, which happened. However, I ignored this entry point, as I did not think that the bulls would be able to rehabilitate so quickly. The disappointing report on retail sales in the US helped the pound regain control of the level of 1.4070, the test of which from top to bottom created an additional entry point into long positions by the end of the US session.
Important data on inflation in the UK will be released this morning, which may lead to another surge in the pound's volatility, but the whole emphasis will be placed on the Federal Reserve's decision on interest rates. The initial task in the European session is to protect the support at 1.4067, which is also the lower border of the wide horizontal channel. The pound has been in it for quite a long time and going beyond it will determine the succeeding medium-term direction. Forming a false breakout in the area of 1.4067 will be the first signal to open long positions in order to restore the pair to the resistance area of 1.4097. Moving averages, playing on the side of the bears, are just above this area. A breakthrough and consolidation above the level of 1.4097 will open a direct path to the resistance at 1.4128, and then to the area of 1.4156, where I recommend taking profits. If GBP/USD drops to the 1.4067 area amid weak inflation data, as well as the lack of buying activity there, it is best to postpone long positions until the low of 1.4037 is renewed. I also recommend buying the pound immediately on a rebound from the level of 1.4001, counting on an upward correction of 20-25 points within the day.
To open short positions on GBP/USD, you need:
The bears have one task - a breakthrough and consolidation below the support of 1.4067. The fact that they missed this level yesterday indicates high buying interest at new local lows. Bulls do not want to let go of the market and are ready to enter it at every opportunity. Only a test of the level of 1.4067 from the bottom up will indicate the formation of a new entry point into short positions, which will allow GBP/USD to get out of the horizontal channel. In this scenario, the bears will aim for support at 1.4037, and the base of the 40th figure - 1.4001, where I recommend taking profits, will act as a further level. If the inflation rate surprises traders for the better, then the pound is likely to rise above the resistance at 1.4097. If the bears are not active, then I recommend postponing short positions until the test of a larger high of 1.4128, or even higher - until the 1.4156 area is updated, where you can sell the pound immediately on a rebound, counting on a downward correction of 20-25 points within the day.
The Commitment of Traders (COT) reports for June 8 showed that both long and short positions decreased, but this did not negatively affect the positive delta, but on the contrary, it even increased due to a larger reduction in sellers' positions. This indicates the presence of a fairly large interest of buyers with each decline in the pound. Similar statements from representatives of the Bank of England no longer work, and the market reacts rather weakly even to the speeches of Governor Andrew Bailey. Without real changes and adjustments to the bond buying program by the central bank, it will be quite difficult for the British pound to get out of the horizontal channel, in which it has been in for almost a month. An important moment will be the full opening of the UK economy, which is scheduled for the 20th of this month. The spread of the Indian strain of the coronavirus in the territory creates a number of obstacles to this, which affects the desire of investors to buy the British pound. The best scenario is to buy for every good decline in the British pound against the US dollar. The COT report indicated that long non-commercial positions fell from 64,204 to 59,238, while short non-commercial positions fell much more strongly from 40,079 to 31,524. As a result, the non-commercial net position rose from 24,125 to 27,714. Last week's closing price changed significantly and amounted to 1.41757 against 1.42270.
Indicator signals:
Trading is carried out below 30 and 50 moving averages, which indicates a bearish market and a possible further decline from the pound.
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
A breakthrough of the upper border of the indicator in the area of 1.4097 will lead to a new wave of growth for the pound. Surpassing the lower border of the indicator in the area of 1.4050 will increase the pressure on the pair.
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.
