To open long positions on GBP/USD, you need to:
In the first half of the day, several signals were formed to enter the market. Let's look at the 5-minute chart and analyze all the entry points. The formation of a false breakout in the support area of 1.4142 at the beginning of the European session led to forming a signal to open long positions. However, it never realized this signal. Sometime after the bears took control of 1.4142, there was a reverse test from the bottom up, which led to the formation of a signal to sell the pound to continue the downward trend. At the time of writing, the downward movement was about 30 points.
In the afternoon, much will depend on the statements made by the Federal Reserve System representatives, from which market participants have long been waiting for hints of changes in monetary policy. The primary task of GBP/USD buyers will be to regain control over the level of 1.4142. Only its breakout and a top-down test on the volume will open a direct road for GBP/USD to the area of the maximum of 1.4188, where the moving averages play on the sellers' side. I recommend fixing the profit there. The next significant resistance is seen only in the area of 1.4241. If the pressure on the pound continues in the second half of the day, the bulls will declare themselves only in the support area of 1.4102, from which I recommend opening long positions only if a false breakout is formed. You can buy GBP/USD immediately on a rebound from a larger minimum of 1.4056, based on an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need to:
The main task of the bears for the second half of the day will be to protect the resistance of 1.4142. As long as trading is conducted below this range, sellers will have every chance of a further downward movement of GBP/USD to reach a minimum of 1.4102, where I recommend taking the profits. The formation of a false breakout in the area of 1.4142 will also be an additional signal to sell the pound. A breakout and a test of the area of 1.4102 from the bottom up, together with good fundamentals for the US economy, will form an additional entry point into short positions, which will collapse the GBP/USD already in the minimum area 1.4056. In the scenario of the pound rising in the second half of the day and the lack of activity on the part of sellers in the area of 1.4142, it is best not to rush. I advise you to postpone short positions until the update of the maximum of 1.4188, from which you can sell GBP/USD immediately on the rebound with the expectation of a downward correction of 20-25 points within the day.
Let me remind you that the COT reports (Commitment of Traders) for May 25 recorded a reduction in short positions and a sharp increase in long ones. Recent statements by the Bank of England representatives that now is the time to think about curtailing support measures and raising interest rates surprised many traders. However, this returned the British pound's demand, which managed to pull up to annual highs. The pound was also supported by the news that from June 21 this year, the UK economy will be fully open, and all restrictive measures due to COVID will be canceled. It will be a good bullish boost for retail sales and inflation. Against this background, the upward potential of the pound will remain quite high. You need to wait for a little. The COT report indicates that long non-profit positions increased from 63,027 to the level of 64,193. Still, short non-profit positions sharply decreased from the level of 38,127 to the level of 33,534, which indicates profit-taking and the departure of sellers from the market after unsuccessful attempts to turn the market to their side. It is another plus in the piggy bank of buyers of the pound and those who believe in continuing the medium-term upward trend. As a result, the non-profit net position increased from 24,900 to 30,659. The closing price of last week did not change significantly and amounted to 1.41553 against 1.41479.
Signals of indicators:
Moving averages
Trading is conducted below 30 and 50 daily averages, which indicates a further decline in the pair's trend.
Note: The period and prices of the moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger Bands
A break of the lower limit in the area of 1.4170 will increase the pressure on the pound. The growth will be limited by the upper level of the indicator in the area of 1.4255.
Description of indicators
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet specific 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 the short and long positions of non-commercial traders.
