To open long positions on GBP/USD, you need:
In my morning forecast, I paid attention to the level of 1.3636, where I recommended entering the market. Let's look at the 5-minute chart and analyze the entry points. The instant breakout of the support of 1.3662 did not allow me to form a good entry point into short positions, so I was forced to skip this signal. After the pair fell to the support area of 1.3636, a false breakdown was formed, which led to the formation of a good entry point into long positions. As a result, there was an increase of more than 30 points up to the resistance of 1.3662. Several unsuccessful attempts to gain a foothold above this range led to the formation of a signal to open short positions and the repeated decline of the pound to the support area of 1.3636.
Now, from a technical point of view, everything has changed. The trend remains downward, and it is best to sell on growth from large resistance levels. The lack of important fundamental statistics and a sharp surge in coronavirus infections in the UK continue to pressure the pound. In the second half of the day, the pressure on the pair may continue, and the breakdown of important local lows will result in a major sale of GBP/USD. Therefore, proceed very carefully with purchases. The ideal option for buyers will be a decline in the pound and the formation of a false breakdown at the level of 1.3627, which was formed today in the first half of the day. Its protection forms a signal to open long positions with the expectation of recovery to the area of 1.3657. A break of 1.3657 and a test of this area from top to bottom, together with weak data on the US economy, will form a new signal to buy GBP/USD, which will open a direct road to the maximum of 1.3688, where the moving averages are playing on the sellers' side. If the pressure on GBP/USD persists in the second half of the day, and the bulls will not offer anything in the support area of 1.3627, it is best to postpone long positions until the level of 1.3600 is updated. Or you can buy GBP/USD immediately for a rebound, counting on an upward correction of 25-30 points within the day from the minimum of 1.3566. Remember that you are trading against a downward trend. Thus, be careful with purchases.
To open short positions on GBP/USD, you need:
The initial task of the bears is now to break through the next support of 1.3627, which was formed in the first half of the day. Good fundamental statistics on the state of the housing market in the US can increase the pressure on the pair, and the test of the level of 1.3627 from the bottom up forms an excellent signal to open short positions, which will push the pair to another local minimum in the area of 1.3600. Its breakdown will lead to the demolition of several buyers' stop orders and collapse GBP/USD already to the area of 1.3566, where I recommend fixing the profits. If the pair grows today during the American session, the bears will have to think carefully about protecting the resistance of 1.3657, just above which the moving averages play on their side. Only the formation of a false breakdown forms an additional signal to sell the pound. In the absence of active actions of sellers in the area of 1.3657, I recommend postponing sales until the test of a larger maximum of 1.3688 or selling the pair immediately for a rebound from 1.3721, counting on a downward correction of 25-30 points within the day.
The COT reports (Commitment of Traders) for July 13 recorded a sharp reduction in long positions and a slight increase in short ones. It suggests that inflation in the United States of America still affected the mood of buyers of the pound in a negative direction. The fact that the Bank of England representatives have recently been reluctant to talk about plans to reduce the bond purchase program once again proves their cautious position on this issue. On July 19 of this year, the UK government completely lifted all quarantine restrictions. However, according to the latest figures on the incidence of a new coronavirus "Delta" strain in the country, this is not for long. Undoubtedly, after each major movement of the GBP/USD down, traders show special interest since the central bank will start talking about curtailing measures to support the economy sooner or later, positively impacting the British pound and leading to its growth. But while there has not been a serious exit beyond the target level of inflation in the UK, it is unlikely that the Bank of England will rush to change its policy. Despite this, the optimal scenario is to buy the pound with every good decline in pair with the US dollar. The COT report indicates that long non-commercial positions decreased from the level of 57,232 to the level of 44,686, while short non-commercial positions increased from the level of 35,329 to the level of 36,717. As a result, the non-commercial net position decreased to 7,969 against 21,903. The closing price of last week rose slightly and amounted to 1.3886 against 1.3853.
Signals of indicators:
Moving averages
Trading is conducted below 30 and 50 daily averages, which indicates that the pound will continue to decline in the short term.
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
In case of growth, the average border of the indicator in the area of 1.3657 will act as a resistance.
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.
