To open long positions on GBP/USD, you need:
Yesterday, only one signal for opening short positions in the pound was formed, as the afternoon passed without the set levels being tested. Let's take a look at the 5 minute chart and break down the trade. In the first half of the day, I advised you to pay attention to the level 1.4171 and open short positions from it in continuation of the downward trend. You could clearly see how the bulls are trying to get out above the resistance of 1.4171, but nothing good came of it. Forming a false breakout there resulted in creating a signal to open short positions, which brought the market back under the control of the bears. As a result, the drop was more than 60 points. This level was completely "smeared" in today's Asian session, which forced the technical picture of the pair to be revised.
Before examining the technical picture of the pound, let's take a look at what happened in the futures market. A shift took place in favor of the bears, which indicates a rather restrained approach of the bulls at current highs. The Commitment of Traders (COT) reports for May 18 showed that long positions decreased while short ones slightly rose. Insufficiently strong inflation in Great Britain allows the members of the Bank of England committee to adhere to a super-soft monetary policy, on which the succeeding direction of the British pound now depends. The fight against Covid is over and no one really remembers it in England anymore, especially since the economy has opened completely since summer began, which is a good bullish impetus for retail sales and inflation. Against this background, the upward potential of the pound remains quite high, you just need to wait a bit. Do not be surprised if there are further large drawdowns in GBP/USD to find the bottom and large static buyers. Considering that the fundamental data has not greatly influenced the pair's direction lately, I recommend paying more attention to the statements of the representatives of the Bank of England and its Governor Andrew Bailey. The COT report indicated that long non-commercial positions were down 64,947 to 63,027, but this looks more like a profit taking than a rejection of long positions due to a change in market direction. At the same time, short non-commercial positions rose from 36,771 to 38,127, as a result of which the non-commercial net position fell to 24,900 from 28,176 a week earlier. Last week's closing price did not change significantly and amounted to 1.41479 against 1.41308.
Today's main task is to sustain control of support at 1.4141, which was formed yesterday afternoon amid low volatility of the pair. It is quite possible that the data on the growth of retail sales from the Confederation of British Industry will be able to push the pound to rise, and forming a false breakout at 1.4141 creates another signal to open long positions in continuation of the bull market that we have been observing since the beginning of this month. In such a scenario, one can again count on an update and a test of the resistance at 1.4201, rising above which will not be so easy. Only good data on the UK economy will become an impetus for building up new long positions, and a downward test of the level of 1.4201 can open a direct path for GBP/USD to the highs of 1.4253 and 1.4310, where I recommend taking profits. If the pound is under pressure, and the bulls are not active in the support area of 1.4141, then I recommend not to rush into long positions. The optimal scenario would be longs immediately on a rebound from the support of 1.4093, or even lower - from the level of 1.4041, counting on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
The bears need to think of a way to regain control of the support at 1.4141. However, it is unlikely that today we can expect bad fundamental data for retail sales in the UK, which is a headache for the bears. So far, they have nothing to rely on. Only a breakthrough and consolidation below the level of 1.4141 with a reverse test from the bottom up can result in creating a good entry point to short positions in hopes that the pair would return to the area of 1.4093. The next target will be the level of 1.4041, where I recommend taking profits. If we see the pound rise during the European session, then the bears will think of a way to defend the resistance at 1.4201. Forming a false breakout there can create an entry point into short positions. If sellers are not active in this range, it is best to postpone short positions until a large local high in the 1.4253 area is renewed, or even higher - from a high like 1.4310, counting on a downward correction of 20-25 points within the day.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates the sideways nature of the market.
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
Surpassing the lower boundary at 1.4130 will lead to a new wave of decline for the pair. Surpassing the upper border of the indicator in the area of 1.4180 will result in continuing the bullish trend.
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.
