To open long positions on GBP/USD, you need:
Yesterday, several signals were formed to enter the market in long positions, and all of them turned out to be quite profitable. Let's take a look at the 5-minute chart and break down the trades.
In my morning forecast, I drew attention to the support at 1.4117 and recommended making decisions from this level. One could see how the bulls actively defended this range several times, forming a false breakout there with a good entry point in order to continue the upward trend in the pound, observed last Friday. As a result, the pair recovered to the resistance area of 1.4167, which made it possible for us to take around 50 points from the market. In the second half of the day, the bulls did not wait and they managed to go beyond the 1.4167 level. A reverse test, namely in this scenario, where I advised you to buy the pound in yesterday's forecast, resulted in creating an entry point into long positions. As a result, the growth amounted to another 20 points.
Before examining the technical picture of the pound, let's take a look at what happened in the futures market. And if a week earlier the shift took place in favor of the bulls, then in this report, the bears seized control of the market again, which indicates a sufficiently nervous state of the British pound, which is also displayed on the chart. The Commitment of Traders (COT) reports for June 1 showed a slight increase in long positions and a very large growth in short ones, which was evidence of a sharp fall in the pound. The statements of the Bank of England representatives no longer work, as market participants need concrete actions, not promises. Until they are present, it will be very difficult for the bulls to surpass new local highs. The risk of a later opening of the UK economy due to the spread of the Indian strain of the coronavirus also poses a number of disincentives for the bulls. However, as soon as the central bank starts to take inflation seriously and talk about changes in the volume of the asset purchase program, the demand for GBP/USD will immediately return. Therefore, the optimal scenario is buying everytime there is a good decline in the British pound against the US dollar. The COT report indicated that long non-commercial positions rose from 64,193 to 64,204, while short non-commercial positions rose much stronger from 33,534 to 40,079, which indicates the emergence of new bears in the market after a couple of regular local highs. As a result, the non-commercial net position decreased from the level of 30,659 to the level of 24,125. The closing price of the last week changed and amounted to 1.42270 against 1.41553.
The bulls' main task for today is to keep support at 1.4127 under control, which they managed to protect yesterday morning against the background of low volatility for the pair. We don't expect important data on the UK economy today, so the pound may continue to rise, but this requires forming a false breakout at 1.4127, which will generate another signal to open long positions, counting on a new upward trend in the pound and to go beyond the horizontal channel. in which we have been since the end of last month. In such a scenario, one can count on an update of resistance at 1.4189. A breakthrough and test of this area from top to bottom will open a direct road to new highs in the 1.4241 area, where I recommend taking profits. If the pressure on the pound returns, and the bulls are not active near the support of 1.4127, I recommend not to rush into buying: the optimal scenario would be long positions immediately to rebound from support 1.4085, 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 support at 1.4127. However, before that, most likely, the bears will need to form a false breakout at the level of 1.4189. An unsuccessful attempt to rise above this range creates an excellent signal to open short positions in hopes of falling to the area of the low of 1.4127. A breakthrough and consolidation below this range with a reverse test of it from the bottom up can create another entry point to short positions in hopes that the pair would return to support at 1.4085 and an exit to new lows in the area of 1.4041, where I recommend taking profits. If the bears are not active near the 1.4189 high, it is best to refrain from selling until the new resistance at 1.4241 is updated, where you can open short positions in the pound immediately on the rebound, counting on a downward correction of 20-25 points within the day. The 1.4241 level is the upper border of a wide horizontal channel, a breakthrough of which will determine the pair's succeeding direction.
Indicator signals:
Trading is carried out above 30 and 50 moving averages, which indicates a possible further growth of 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 breakout of the upper border of the indicator in the area of 1.4189 will lead to an increase in the pound. A breakout of the lower border in the area of 1.4150 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.
