To open long positions on GBP/USD, you need to:
In the first half of the day, there were quite many events on the pound, which I would like to talk about. Let's look at the 5-minute chart and figure out what happened. I paid attention to the support of 1.3790 and recommended opening long positions from it when forming a false breakout. Everything happened exactly with the scenario described in the morning. Initially, there was a false breakout at 1.3790 and an increase to the resistance of 1.3833. But even if you missed the entry from 1.3790, I also advised you to buy the pound to continue growth after the breakdown and consolidation above the level of 1.3833, which happened. The increase was about 50 points.
Now buyers are focusing all their attention on the new resistance of 1.3888. A breakout and a test of this level from top to bottom may form an additional entry point into long positions to continue the pound's growth. Trading against the trend and buying against the trend at the current highs is not a good idea. A break and consolidation above 1.3888 will lead GBP/USD to the resistance area of 1.3938 and then to the further area of 1.3993, where I recommend taking the profits. A more optimal scenario for opening long positions is a downward correction for the pair to the support area of 1.3833, from which the growth continued today. The absence of important fundamental statistics on the US economy can lead to implementing such a scenario. If the bulls do not show themselves in the area of 1.3833, I recommend opening long positions for a rebound from the low of 1.3790 to move 20-25 points inside the day.
To open short positions on GBP/USD, you need to:
The sellers' task has changed. Now they need to think about how to defend the resistance of 1.3888. The formation of a false breakout in the second half of the day will be an excellent signal to open short positions to continue the downward trend formed last week. In this case, you can expect a return to the support of 1.3833, where I recommend fixing the profit. A breakout and consolidation below this range will quickly bring the pound's buyers back from heaven to earth and lead to a test low of 1.3790. If the bears do not show any activity in the area of 1.3888, then I advise you to sell the pound only for a rebound from the more significant local high of 1.3938 or even higher - from the level of 1.3993, based on a downward correction of 20-25 points within the day.
In the COT reports (Commitment of Traders) for June 8, a reduction in both long and short positions was recorded. However, this did not negatively affect the positive delta. On the contrary, it even increased due to a larger reduction in the positions of sellers. It indicates the presence of a sufficiently large interest of buyers with each decline in the pound. The same type of statements by representatives of the Bank of England no longer work, and the market reacts rather weakly even to the speeches of Governor Andrew Bailey. Without real changes and adjustments to the bond-buying program by the central bank, it will be quite difficult for the British pound to get out of the side channel in which it has been for almost one month. An important point will be the full opening of the UK economy, which is scheduled for the 20th of this month. The spread of the Indian strain of coronavirus in the territory creates several obstacles to this, which affects the desire of investors to buy the British pound. The optimal scenario is to buy at every good decline in the British pound against the US dollar. The COT report shows that long non-profit positions fell from the level of 64,204 to 59,238, while short non-profit positions fell much more strongly from the level of 40,079 to the level of 31,524. As a result, the non-commercial net position increased from the level of 24,125 to the level of 27,714. The closing price of last week changed significantly and amounted to 1.41757 against 1.42270.
Signals of indicators:
Moving averages
Trading is conducted around 30 and 50 daily averages, which indicates an attempt by buyers to take control 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 in the area of 1.3880 will lead to a new wave of growth of the pound. In the case of a decline in the pair, the average border of the indicator in the area of 1.3825 will provide support.
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.
