To open long positions on GBP/USD, you need:
No signals were formed for entering the market in the first half of the day, which cannot be said about the US session, which was full of various signals, and, unfortunately, not only correct ones. Let's take a look at the 5 minute chart and break down the entry points.
After the pound dropped to the support area of 1.4154, a false breakout led to creating a signal to open long positions, hoping for the pair to recover. However, there was no quick upward movement, and the bears managed to surpass this range, having tested it from the bottom up, which created a signal to sell the pound. Unfortunately, I did not see a succeeding sharp downward movement for the pound, and after a while the bulls regained 1.4154, re-forming an entry point into long positions from it. This led to a larger upward correction by 40 points, thereby covering all the losses received from transactions before.
As a result of a good surge in volatility last Friday, the market remained on the side of the bulls. Their primary task for today is to control support at 1.4175, which was formed at the end of last week. The moving averages, playing on the side of the bulls, also pass there. Considering that important reports on the UK economy are not expected today, and there is a holiday in England, then in general, the pound might be under pressure in the first half of the day. Forming a false breakout at the level of 1.4175 creates a signal to open long positions in continuation of the bull market, which we have been observing all month. In this scenario, we can count on an update of resistance at 1.4216 again. Its breakthrough and test from top to bottom will open a direct path for GBP/USD already to the highs of 1.4264 and 1.4310, where I recommend taking profits. If GBP/USD is under pressure, and the bulls are not active in the support area of 1.4175, then I recommend that you take your time with long positions. The optimal scenario would be long positions immediately to a rebound from the 1.4137 low, or even lower - from the 1.4102 level, counting on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
Forming a false breakout in the area of resistance at 1.4216 and the absence of important fundamental statistics can cause GBP/USD to drop to the support area of 1.4175, on which a lot will depend today. This level is the middle of the horizontal channel, where the moving averages, which play on the bulls' side, also pass. A breakthrough and test of this area from the bottom up (by analogy with the sell, which I analyzed above), creates an additional entry point into short positions, which will plunge GBP/USD already to a low like 1.4137, where I recommend taking profits. The next target will be support 1.4102. In case the pound grows in the first half of the day and the bears are not active in the area of 1.4216, then it is best not to rush to sell: I advise you to postpone short positions until the high of 1.4264 is renewed, from which you can open short positions immediately on a rebound, counting on a downward correction of 20-25 points within the day.
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.
Indicator signals:
Trading is carried out above 30 and 50 moving averages, which indicates an attempt by the bulls to continue the upward trend for the pair.
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
Growth will be limited in the area of the upper level of the indicator 1.4216, a breakthrough of which will lead to a new wave of growth for the pair. In case the pair falls, support will be provided by the lower border of the indicator in the area of 1.4150.
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.
