To open long positions on GBP/USD, you need:
The bulls were actively defending the 1.3753 level in the first half of the day. Let's take a look at the 5 minute chart and break down the trades that were formed. It is clearly seen how the pair is gradually sliding to the support area of 1.3753, after which several false breakouts are formed, where I advised you to open long positions while expecting a reversal of the downward trend. However, there was no big upward movement, and after the next test, the bears tried to break through 1.3753. After some time, the 1.3753 level was tested from the bottom up and a sell signal was generated. The whole emphasis was on the US report, which disappointed traders, which caused the pound to rise. Unfortunately, we failed to wait for the next test of 1.3753 from top to bottom, so there were no more buy signals.
Quite important data on the PMI for the UK services sector and the composite index will be published today, which may lead to a new wave of growth in the pound, but on condition that the reports turn out to be better than the forecasts of economists. Therefore, the best option for the bulls is to form a false breakout at the level of 1.3811, which generates a signal to open long positions in hopes that the pound would further recover to the resistance of 1.3870. The moving averages pass below 1.3811, which provides support for the pair and leaves hope for a larger upward correction. Surpassing 1.3870 and a downward test of this area will create a new signal to buy GBP/USD and open a direct road to the 1.3922 high, where I recommend taking profits. A more distant target will be the 1.3978 high, but given that today is Independence Day in the US, it is unlikely for the pair to reach it. If GBP/USD is under pressure in the first half of the day, and the bulls are not active in the 1.3811 area, it is best to postpone long positions until the 1.3771 support is renewed. I recommend buying the pair immediately on a rebound only from this month's low in the 1.3732 area, counting on an upward correction of 25-30 points inside
To open short positions on GBP/USD, you need:
The bears' initial task is to protect the resistance at 1.3870, which the bulls still have to try to get to. Forming a false breakout there will be a sell signal, which will push the pair to support 1.3811, for which there will be an active struggle today. Only a breakthrough of this range along with removing a number of the bulls' stop orders and a reverse test of 1.3811 from the bottom can result in forming an entry point into short positions in continuation of the bear market, in hopes of pulling down the pair to 1.3771, where I recommend taking profit. The next target will be this month's low at 1.3732. If the bears are not active in the resistance area of 1.3870, I recommend postponing short positions until the test of the 1.3922 high, where you can open short positions immediately on a rebound, counting on a downward correction of 25-30 points within the day.
The Commitment of Traders (COT) report June 22 shows that long positions have significantly declined while short positions have increased. The report showed changes in the market after the Federal Reserve's meeting on monetary policy. A similar meeting from the Bank of England, which took place last week, only exacerbated the situation. Many traders were counting on a more proactive stance on interest rates and the bond purchase program from the central bank. But as we already know, as long as no serious inflationary pressures are noticed in the UK, the Bank of England is unlikely to rush to make changes. The spread of the Indian strain of the coronavirus in the UK creates additional difficulties with the full opening of the economy, so traders also do not find reasons for the pound's growth. The economy may show more modest results for the second quarter of 2021. Despite this, the best scenario is to buy the pound for every good decline against the US dollar. The COT report indicates that long non-commercial positions fell from 55,203 to 51,445, while short non-commercial positions, on the contrary, rose sharply from 23,033 to 33,518. As a result, the non-commercial net position decreased from 32,170 to 17 972. Last week's closing price changed significantly and amounted to 1.3924 against 1.4109.
Indicator signals:
Trading is carried out above 30 and 50 moving averages, which indicates a reversal in the bear market.
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
In case of a decline, support will be provided by the lower border of the indicator at 1.3770. If the pair grows, the upper border of the indicator in the area of 1.3860 will act as a resistance.
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.
