To open long positions on GBP/USD, you need:
Everyone was waiting for the Bank of England's decision yesterday, which did not greatly affect the direction of the British pound, but helped it to maintain its positions against the US dollar. In my morning forecast, I drew attention to the resistance at 1.3902 and recommended making decisions on entering the market. Let's take a look at the 5 minute chart and see what happened. A sharp rise in the pair in the first half of the day above the level of 1.3902 then resulted in a downward correction of GBP/USD to this range, however, before the reverse test of 1.3902 from top to bottom, literally a couple of points were missing, so there was no signal to open long positions. The revised technical picture for the second half of the day, taking into account the surge in volatility, did not result in creating signals to enter the market, since they did not reach the levels I indicated.
The growth prospects for the pound are still pretty good. However, for this it is necessary to wait for the reports on the US labor market, which will set the direction of the market today. If the indicators turn out to be much better than the forecasts of economists, the pound's decline will be ensured. In this case, the bulls should try to protect support at 1.3907, which is the middle of the horizontal channel, or concentrate on protecting this week's low at 1.3874, from which I also recommend opening long positions only if a false breakout is formed there. If the bulls are not active in these ranges, the best solution would be long positions immediately on the rebound from the larger support at 1.3846. If the data on the US labor market turn out to be worse than the forecasts of economists - a signal to buy the pound. In this case, the bulls will concentrate on the breakdown of the resistance at 1.3944, the reverse test of which from top to bottom creates a new entry point into long positions in order to continue the upward trend to the area of the last month's high at 1.3978. A breakthrough of this level will lead to renewal of new local resistances at 1.4059 and 1.4097, where I recommend taking profits.
To open short positions on GBP/USD, you need:
The initial task of the bears is to protect the resistance at 1.3944. Much will depend on the market reaction to the data on the number of people employed in the US nonfarm sector. Forming a false breakout there will return pressure to the pound, which will create the first signal to open short positions in hopes that the pair would fall to the middle of the 1.3907 horizontal channel. A breakdown of this level with a reverse test from the bottom up will push GBP/USD to the lower border of the 1.3874 channel, beyond which it will upset the entire market equilibrium and hit the stop orders of the bulls. Such a scenario will push the pound even lower towards the supports at 1.3846 and 1.3807, where it is worth considering taking profit. The next target is the area of 1.3768. If there are no active bears in the 1.3944 area, I advise you to postpone selling until the next major resistance at 1.3978, which is last month's high. I also recommend opening short positions from there only if a false breakout is formed. Selling GBP/USD immediately on a rebound is possible from a new local high in the area of 1.4059, counting on a downward correction of 25-30 points within the day.
The Commitment of Traders (COT) reports for July 27 showed that long positions decreased, but sellers also did not insist and partially reduced their position volume. The pound's growth throughout the week allowed the GBPUSD pair to return to monthly highs, but failed to settle above. The panic after the lifting of all quarantine restrictions in the UK has receded and now the main focus this week will be on the Bank of England (BoE) meeting on monetary policy. The European Central Bank and the Federal Reserve did not change anything. Most likely, the BoE will do the same. Before abandoning stimulus measures, members of the BoE committee will probably wait for accurate data on how things are in the labor market. It is expected that a large-scale government program to support the labor market will be completed in September this year, which may force the central bank to take a longer wait-and-see attitude, since the central bank has not yet experienced any particular problems with inflationary pressure. If the representatives of the BoE start talking more and more about plans to reduce the bond purchase program, this will provide significant support to the pound. I advise you to stick to the strategy of buying the pair every time it drops significantly, as the major players do. The COT report indicated that long non-commercial positions fell from 44,223 to 41,194, while short non-commercial positions fell from 47,720 to 46,878, indicating a cautious approach to selling at current highs. As a result, the non-commercial net position remained negative and amounted to -5,684 against -3,496 a week earlier. Last week's closing price jumped from 1.3668 to 1.3826.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates the sideways nature of the market in the short term.
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
Volatility has decreased, which does not provide signals to enter the market.
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.
