To open long positions on GBP/USD, you need to:
In my morning forecast, I paid attention to the support of 1.4117 and recommended making decisions from this level. If you look at the 5-minute chart, you will see how the bulls actively defended this range several times, forming a false breakout with a good entry point in the continuation of the upward trend in the pound observed last Friday. At the time of writing, the pound has moved up from the entry point of about 35 points and aims for the area of the morning resistance of 1.4167.
From a technical perspective, nothing has changed for the buyers, as they perfectly coped with their morning tasks. In the second half of the day, there is no important data on the US, so the entire focus of the market will be on the analysis of Friday's report on the US labor market. In the event of a decline in the euro, the task of buyers for the US session remains the same protection of the support of 1.4117. The formation of a false breakout will be a signal to open long positions in the expectation of continuing the bull market formed at the end of last week. If there is no activity of buyers, it is best to postpone long positions until the update of the minimum of 1.4085, from which last Friday it was possible to observe a reversal of the pair. This level is a kind of lower limit of a wide side channel, in which the pound has been for a long time. An equally important task for the bulls will be to regain control of the resistance of 1.4167, which they are now targeting. Only fixing at this level with its subsequent test from top to bottom will lead to forming a signal to open long positions with an exit to the maximum of 1.4197, where I recommend fixing the profit. The further target remains the resistance of 1.4241.
To open short positions on GBP/USD, you need to:
Sellers failed in their task to break through the area of 1.4117. To reverse the trend in the second half of the day, they will still need a breakout and a test from the bottom up of the level of 1.4117. Only this forms the entry point to short positions in the expectation of a resumption of the bear market. Such a scenario should return GBP/USD to the minimum of 1.4085, where I recommend taking the profit. It is hardly possible to count on a test of the further support of 1.4041, as important fundamental statistics are not expected today, and the speech of the central bank leaders is not scheduled. It is possible to say that buyers have stopped the downward trend only after they regain control over the resistance of 1.4167. Therefore, the priority task of the bears is to protect this range. The formation of a false breakout will be a signal to open short positions. In the scenario of the pound's growth in the first half of the day and the lack of bear activity in the area of 1.4167, it is best not to rush to sell. I advise you to postpone short positions until the update of the maximum of 1.4197, from which you can sell the pound immediately on a rebound with the expectation of a downward correction of 20-25 points within the day. The next major resistance is around 1.4241.
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 demand for the British pound, 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 an excellent bullish boost for retail sales and inflation. Against this background, the upward potential of the pound will remain quite high. The COT report indicates that long non-profit positions increased from 63,027 to the level of 64,193. However, 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 around 30 and 50 daily averages, which is more indicative of the sideways nature of the market.
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 upper limit of the indicator above 1.4170 will lead to a new pound growth. A break of the lower limit of the indicator in the area of 1.4120 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. 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.
