To open long positions on GBP/USD, you need:
In the first half of the day, I paid attention to the level of 1.3817 and recommended making decisions based on it. Let's look at the 5-minute chart and talk about what happened. It is visible how the pair gradually slides into the support area of 1.3817. A false breakdown is formed at this level, where I advised opening long positions with the expectation of a reversal of the upward trend. The downward movement occurred after a negative revision of the UK GDP for the 1st quarter of this year. At the time of writing, the bulls made a great rebound and reached the resistance of 1.3870.
Buyers coped with the task set for them and defended the support of 1.3817. I did not revise the levels for the second half of the day, and the new target of the bulls remains the resistance of 1.3870. A reverse test of this level from top to bottom will form an additional signal to buy the pound and open a direct road to the area of 1.3922, where I recommend fixing the profits. A more distant target will be a maximum of 1.3978. However, it will not be so easy for buyers to get to it. Only very weak data on the US economy will lead to the implementation of such a scenario. If the pressure on the pound returns in the second half of the day, and the report from ADP surprises traders, another false breakout formation at the level of 1.3817 will form a signal to open long positions based on the growth of the pound. If there is no activity of buyers in the area of 1.3817 and the further fall of GBP/USD, it is best to postpone long positions until the minimum of 1.3770 is updated, where I recommend buying the pair immediately for a rebound with the aim of an upward correction of 25-30 points within the day.
To open short positions on GBP/USD, you need:
Although the bears reached the level of 1.3817, they did not manage to break beyond it. Their initial task is to protect the resistance of 1.3870, which was formed following the results of yesterday, and where the moving averages are located, which play an important direction in the market movement. The formation of a false breakdown will be a signal to sell the pound, which will push the pair back to the support of 1.3817, for which it will have to fight very seriously. A breakthrough of this range and a reverse test from the bottom up can occur only in the case of excellent indicators for the growth of the number of employees from ADP. The data should at least double the forecast of economists. Only such a scenario will lead to the formation of an entry point into short positions in the continuation of the bear market to fall to the area of 1.3770, where I recommend fixing the profits. A longer-range target will be a minimum of 1.3717. If there are no active actions of sellers in the resistance area of 1.3870 and insufficient data from ADP, I recommend postponing sales to the test of the maximum of 1.3922, or even higher - to the level of 1.3978, where you can open short positions immediately for a rebound based on a downward correction of 25-30 points within the day.
Let me remind you that the COT reports (Commitment of Traders) for June 22 recorded a sharp reduction in long positions and an increase in short ones. The report showed changes in the market after the US Federal Reserve's monetary policy meeting. A similar meeting of the Bank of England, which took place last week, only worsened the situation. Many traders counted on the regulator's more active position concerning interest rates and the bond purchase program. But as we already know, as long as there is no serious inflationary pressure in the UK, the Bank of England is unlikely to rush to make changes. The spread of the Indian strain of coronavirus in the UK creates additional difficulties with the full opening of the economy, so traders also do not find reasons for the growth of the British pound. The economy may show more modest results in the 2nd quarter of 2021. Despite this, the optimal scenario remains the purchase of the pound with each good decline in pair with the US dollar. The COT report indicates that long non-commercial positions decreased from the level of 55,203 to the level of 51,445.
On the contrary, short non-commercial positions increased sharply from the level of 23,033 to the level of 33,518. As a result, the non-commercial net position decreased from 32,170 to the level of 17,972. The closing price of last week changed significantly and amounted to 1.3924 against 1.4109.
Signals of indicators:
Moving averages
Trading is conducted around 30 and 50 daily averages, which indicates an attempt by the bulls to reverse the downward trend.
Note: The period and prices of 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 1.3870 will lead to a new wave of growth of the pound.
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.
